The IMF lowered its forecast for Asia’s economic outlook on Friday due to the negative effects of global monetary tightening, rising prices blamed on the Ukraine conflict, and China’s sharp slowdown damaged the region’s recovery hopes.
According to the International Monetary Fund’s Asia-Pacific regional economic outlook report, the Fund suggested most central banks must keep hiking interest rates to maintain inflation expectations stable, despite inflation in Asia remains subdued compared with other regions.
“Asia’s strong economic rebound early this year is losing momentum, with a weaker-than expected second quarter,” said Krishna Srinivasan, director of the IMF’s Asia and Pacific Department.
“Further tightening of monetary policy will be required to ensure that inflation returns to target and inflation expectations remain well anchored.”
The IMF cut Asia’s growth estimate to 4.0% this year and 4.3% next year, down 0.9% and 0.8% from April.
“As the effects of the pandemic wane, the region faces new headwinds from global financial tightening and an expected slowdown of external demand,” the report said.
China’s rapid and broad-based economic slowdown, blamed on harsh COVID-19 lockdowns, and its deepening property troubles are among the most significant headwinds, according to the IMF.