IMF Downgrade Asia’s Growth Outlook, Cautions of Supply Chain Risks

Source: Reuters

The International Monetary Fund cut this year’s economic growth projections for Asia and cautioned that new cases of COVID-19 infections and supply chain constraints pose a downside risk to the forecast. CSI 300 Index up +0.98%, Nikkei 225 up +0.65%

• China’s economy will expand by 8.0% this year and 5.6% in 2022, but the economic recovery remains “unbalanced” as repeated COVID-19 outbreaks and fiscal tightening hampers consumption.
• The IMF stated that any “untimely policy normalization or misconstrued policy communications” by the U.S. Federal Reserve could lead to significant capital outflow and increased borrowing costs for Asian emerging economies.
• In its latest regional outlook report, the IMF downgraded this year’s economic growth forecast for Asia to 6.5%, down 1.1% from its forecast made in April. The increase in Delta variant cases hurt consumption and factory output.
• Meanwhile, the IMF upgraded its Asia growth forecast for 2022 to 5.7% from a 5.3% projection in April, signaling progress in vaccinations.