NEW YORK (BLOOMBERG) - The International Monetary Fund (IMF) has lowered its growth forecast for the Asia-Pacific region this year to 4.2 per cent - 0.7 percentage point lower than it expected in April and well below the region's 6.5 per cent growth in 2021.
The fund also cut its 2023 forecast for the area to 4.6 per cent, down by 0.5 percentage point.
"Risks that we highlighted in our April forecast - including tightening financial conditions associated with rising central bank interest rates in the United States and commodity prices surging because of the war in Ukraine - are materialising," Mr Krishna Srinivasan, director of the IMF's Asia and Pacific Department, wrote in a blog post on Thursday (July 28).
"That, in turn, is compounding the regional growth spillovers from China's slowdown," he added.
China is tipped to expand by 3.3 per cent, according to the IMF, down from its 4.4 per cent growth projection in April. The IMF expects the world's second-largest economy to record 4.6 per cent growth next year, a reduction of 0.5 percentage point that reflects the hit from the country's zero-Covid-19 policy and real estate slump.
The IMF warned that there would be sizeable spillovers on regional trading partners.
"Japan and Korea, the two largest regional economies integrated closely with global supply chains and China, will also see growth slow on weaker external demand and disruptions to supply chains," Mr Srinivasan said in the post.
Increased trade policy uncertainty and a fraying of supply chains are also "expected to delay the economic recovery and exacerbate scarring from the pandemic in Asia", said Mr Srinivasan.
"While growth is weakening, Asian inflation pressures are rising, driven by a global surge in food and fuel costs resulting from the war and related sanctions," he added.
Still, the IMF notes some signs of a rebound in economic activity in the region as some pandemic restrictions on mobility are gradually eased.
"The resilience of manufacturing and rebound in tourism are supporting a gradual rebound in Malaysia, Thailand and the Pacific island countries," said Mr Srinivasan.