IMF raises its Asia growth forecast for 2024, India and strong demand remain key drivers

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IMF raises its Asia growth forecast for 2024, India and strong demand remain key drivers

Laborers work at a coastal road project construction site in Mumbai on January 12, 2022.

Punit Paranjpe | Afp | Getty Images

The International Monetary Fund raised its Asia growth forecast for 2024 on Tuesday, as it remained optimistic about India’s growth and focused on the need for more stimulus from China.

The IMF now expects Asia’s economy to grow 4.5% this year, up 0.3 percentage points from six months earlier. Its forecast for 2025 remained unchanged at 4.3%.

“The outlook for Asia and the Pacific in 2024 has brightened: we now expect that the region’s economy will slow less than we previously projected as inflation pressures continue to dissipate,” Krishna Srinivasan, director of Asia and Pacific at the IMF wrote.

The upward revision reflects upgrades for China, the IMF said, where it expects policy stimulus to provide support.

It also called India “the world’s fastest-growing major economy,” where “public investment remains an important driver.” India is currently the world’s fifth-largest economy with GDP of $3.7 trillion and is aiming to become the world’s third-largest by 2027.

IMF’s Srinivasan also wrote that strong private consumption will continue to drive growth in Asia’s other emerging markets.

The IMF credited monetary tightening, lower commodity prices and subsiding supply-chain disruptions with lowering inflation in Asia despite high demand growth.

Mitigating China’s property crisis

The IMF said the biggest risk for Asia’s economy is an extended correction in China’s property sector. That would weaken demand and increase the chances of prolonged deflation, raising the chances of hitting other economies through “direct trade spillovers.”

“This means China’s policy response matters — for both itself and the entire region,” Srinivasan wrote in the blog.

China needs a policy package that “accelerates the exit of nonviable property developers, promotes the completion of housing projects, and manages debt risks of local governments,” the IMF said. It noted China’s fiscal stimulus in October and March helped ease the impact of declining manufacturing activity and sluggish services.

Earlier this year, the IMF said it expects Asia’s largest economy to grow 4.6% in 2024. The projection came before data that showed China’s economy grew by 5.2% last year, matching the official target of around 5%.

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