Press Briefing Transcript: Asia Pacific Department, Spring Meetings 2025

IMF News, April 24, 2025

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Published: April 24, 2025

Overview of 2024 performance

Growth across Asia remained robust in the second half of 2024, with many countries closing large output gaps that had emerged during the Pandemic.
Regional outturn modestly underperformed expectations despite solid underlying drivers in various countries.
China: momentum exceeded expectations in late 2024 and Q1 2025, supported by front-loading of exports and targeted policy support.
Japan: growth slowed early in 2024 due to supply disruptions but recovered in the second half on rebounding domestic demand.
India: growth driven by a pickup in exports and consumption in late 2024; overall outturn surprised slightly to the downside due to a slow start to public investment and temporary factors; private investment remained weak.
Other emerging markets in the region: recovery generally held up with a shift from consumption to investment in many cases.
Inflation: most Asian economies saw inflation return to or near target in 2024. China and Thailand continue to experience persistently low inflation. Japan’s headline inflation has been above target for nearly three years; both headline and underlying inflation in Japan are expected to converge to target in 2027.

Outlook and growth projections

Regional forecast (based on information till April 4):
- Projected regional growth: around 3.9 percent in 2025 and 4 percent in 2026, down from 4.6 percent in 2024 and well below earlier expectations.
- Key downward drivers: lower external demand, a soft tech cycle, and subdued private consumption in several countries.
China:
- Growth downgraded to 4 percent in both this year and next year.
- Downgrades driven by increased tariffs and prolonged trade policy uncertainty; fiscal expansion in the 2025 budget provides a partial offset.
- Specific downgrade magnitudes: 0.5 percent and 0.1 percentage points for the two years referenced.
Japan:
- Projected to accelerate modestly from 0.1 percent in 2024 to 0.6 percent in 2025.
- Projection is 0.5 percentage points less than anticipated.
ASEAN:
- October World Economic Outlook projection: 4.1 percent in 2025 compared to 4.8 percent in 2024, 0.6 percentage points less than anticipated.
- Significant markdowns for some countries like Cambodia and Vietnam.
Korea:
- Growth revised downward by a full percentage point, reflecting heightened global trade tensions and domestic policy uncertainty.
India:
- Projected growth: 6.2 percent in 2025 and 6.3 percent in 2026, down from 6.5 percent in 2024.
- Revisions smaller than for other countries due to lower exposure to the trade shock.
Philippines:
- Revised forecasts: 5.5 percent for this year and 5.8 percent for next year.
- Cumulative downgrade about 1.1 percent (two-year cumulative).
Thailand:
- IMF revised Thai GDP growth from 2.9 percent (January prediction) to 1.8 percent.
Country exposure statistics cited by IMF speakers:
- Exports to the U.S. as share of total exports: Cambodia 37 percent; Vietnam 30 percent; Thailand 18 percent; Philippines 17 percent.

Trade shocks, tariffs, and supply chains

Three reasons Asia is particularly exposed to recent trade policy shocks:

1. Many Asian economies are very open and oriented toward trade and goods. 2. Emerging Asian economies benefited from relatively earlier reopening from the Pandemic, supporting export recovery. 3. Increasing participation in global supply chains with rising exposure to U.S. demand (share of value-added exports to the U.S. has increased both directly and indirectly through global supply chains), with China noted as an exception where this share has declined or plateaued.

Under the U.S. tariff package announced on April 2, the Asia Pacific region would have faced the sharpest increase in effective tariff rates globally; some measures have since been paused but trade tensions and policy uncertainty remain elevated.
Supply chain dynamics:
- Some shifting of supply chains has occurred since 2016; material change takes time but signs of relocation are visible and may continue.
- Trade tensions and higher tariffs can slow exports and investment and create vulnerabilities through disrupted global value chains.
On “winners” from tariff diversion:
- IMF emphasizes there are no winners from a trade war; higher tariffs on China can have negative spillovers by reducing Chinese growth, which in turn harms the region.
- Greater regional integration and structural reform are the preferred routes to capture opportunities and diversify exposure.

Risks to the outlook

Risks are tilted to the downside.
Major downside risks:
- Uncertain trade environment and weaker-than-expected global demand.
- Heightened trade policy uncertainty increasing financial market volatility.
- Asset price volatility disrupting capital flows and investment and tightening financial conditions.
Tech cycle presents mixed risks to regional growth.

Policy recommendations and tradeoffs

Macro policy guidance:
- Exchange rate flexibility is a key buffer against shocks; FX intervention may be used in circumstances of heightened financial market volatility.
- IMF’s Integrated Policy Framework provides a playbook for policy tradeoffs.
- In regions where inflation is at or below target, there is scope for monetary easing to cushion external shocks in many countries; decisions remain data dependent.
- Medium-term fiscal consolidation remains essential, but temporary and targeted fiscal support may be necessary to smooth adjustment and boost demand.
Financial stability and cooperation:
- Prudent and stable macroeconomic policies across countries provide a public good by reducing regional financial market vulnerability.
- Strengthened monetary frameworks and well-regulated financial markets contribute to muted volatility, as observed in recent episodes in Asia.
Structural reforms (medium term):
- Bold and durable structural reforms are needed to reinvigorate productivity and promote sustainable growth.
- Priorities include improving the efficiency of matching capital, labor, and other resources to firms; facilitating structural transformation; promoting innovation; enhancing labor market flexibility; targeted training programs; and strengthening social safety nets.
- Reforms to reinvigorate domestic demand and deepen regional integration can reduce reliance on external markets and strengthen resilience.

Country-specific notes and policy suggestions

China:
- IMF long-standing recommendation: rebalance toward domestic demand, especially consumption.
- Property sector remains a critical constraint; IMF cited an estimate of about 5 percent of GDP needed over 3 to 5 years to address the property sector problems.
- Steps taken (property sector measures, trade-in programs, pension and rural pension steps, targeted subsidies) are positive but deemed insufficient; more comprehensive measures and strengthened social safety nets are required.
- Services sector: increasing role of services can support productivity and growth; reduce obstacles to service sector growth and facilitate labor reallocation to services.
Japan:
- Continue gradual tightening of monetary policy to return inflation to 2 percent by 2027; policy actions to be data dependent.
India:
- Near-term revisions: 6.2 percent (this year) and 6.3 percent (next year), down from 6.5 percent last year.
- IMF highlights need to boost private investment (machinery and equipment investment remains muted).
- Structural reforms (labor market, education, public infrastructure, opening to trade) would support medium-term gains and potential for “Plus One” opportunities, but effects depend on policy implementation.
ASEAN and Thailand:
- ASEAN intraregional trade currently about 21 percent (regionally cited as 20 percent in other remarks); greater intraregional trade could provide diversification away from U.S./China exposure.
- Thailand: slowdown reflects high exposure to the U.S. and significant tariffs; tourism recovery post-pandemic has been relatively slow; negative output gap remains; demographic headwinds and lagging productivity are structural challenges.
Korea:
- Revised down by a full percentage point due to global trade tensions and domestic uncertainty; Q1 outcome shows slowing due to both domestic demand weakness and sharp export declines.
Sri Lanka:
- Team engagement continued despite tariff shocks; uncertainty complicated program macroframeworks and reviews.
- IMF advice: diversify export markets and deepen regional integration; promote private investment through improved investment environment while preserving fiscal integrity; program has provided macro stability (growth picking up, inflation declining); further structural reforms recommended to promote durable private investment.
Bangladesh:
- Delays in reaching staff-level agreement on the third review linked to needed actions on exchange rate reform (greater exchange rate flexibility), revenue mobilization improvements, and questions on financial sector health; good progress but no timeline provided.
Philippines:
- Monetary easing space exists given tame domestic inflation, but decisions are data dependent and must consider global central bank actions due to implications for exchange rates and capital flows.
- Exposure to the U.S.: 17 percent of exports; recent two-year cumulative downgrade about 1.1 percent attributed largely to trade impact and heightened uncertainty.

Financial markets and FX considerations

Recent episodes show:
- Equity markets in Asia have been very volatile amid trade tensions.
- Exchange rate movements have been more contained relative to earlier episodes.
- Corporate and sovereign bond markets have been relatively stable compared to prior episodes, reflecting stronger monetary frameworks and improved resilience.
Policy tools:
- Monetary easing can be used where inflation is at or below target, but central banks must weigh exchange rate and capital flow risks.
- FX intervention can be considered if volatility threatens financial stability; integrated policy frameworks recommended for sequencing and choice of tools.

Source: Press Briefing Transcript: Asia Pacific Department, Spring Meetings 2025