Workers work at a coastal road construction site in Mumbai on January 12, 2022.
Paranjpe Punishment | Afp | Getty Images
The International Monetary Fund on Tuesday raised its Asia growth forecast for 2024, as it remains optimistic about India’s growth and focuses on the need for more stimulus from China.
The IMF now expects the Asian economy to grow by 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 improved: we now expect the region’s economy to slow less than expected as inflationary pressures continue to dissipate,” wrote Krishna Srinivasan, director of Asia and the Pacific at the IMF.
The upward revision reflects improvements in China, the IMF said, where it expects stimulus measures to provide support.
He also called India “the world’s fastest growing large economy”, where “public investment remains an important driver”. India is currently the world’s fifth largest economy with a GDP of $3.7 trillion and aims to become the world’s third largest economy by 2027.
The IMF’s Srinivasan also wrote that strong private consumption will continue to drive growth in Asia’s other emerging markets.
The IMF credits monetary tightening, lower commodity prices and easing supply chain disruptions for lower inflation in Asia despite strong demand growth.
Mitigating the real estate crisis in China
The IMF believes the biggest risk to the Asian economy is a prolonged correction in China’s real estate sector. This would weaken demand and increase the risks of prolonged deflation, increasing the chances of hitting other economies through “direct trade spillovers”.
“This means that China’s policy response is important, both for itself and for the entire region,” Srinivasan wrote on his blog.
China needs a set of policies that “accelerate the exit of unviable real estate developers, promote the completion of housing projects, and manage local government debt risks,” the IMF said. He points out that the fiscal stimulus measures implemented by China in October and March helped to soften the impact of declining manufacturing activity and weak services.
Earlier this year, the IMF said it expected Asia’s largest economy to grow 4.6% in 2024. That projection predated data showing China’s economy had experienced growth of 5.2% last year, matching the official target of around 5%.
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