Asian economies are under pressure as China’s housing problems persist, according to the IMF
An aerial view shows the 39 buildings developed by China Evergrande Group, for which authorities have issued a demolition order, on the artificial Ocean Flower Island in Danzhou, Hainan province, China, January 6, 2022. REUTERS/Aly Song/File Photo Acquire License Rights
- The recovery in Asia could run out of steam due to the weak recovery in China
- US service-oriented strength offers little support to Asia
- China’s sharp real estate adjustment will spill over into Asia – IMF
- BOJ policy normalization could have a big impact on the global market
- The IMF expects Asia’s growth to slow to 4.2% in 2024 from 4.6% this year
MARRAKESH, Morocco, Oct 13 (Reuters) – China’s weak recovery and the risk of a prolonged housing crisis could further dent Asia’s economic prospects, the International Monetary Fund (IMF) said on Friday, warning of a murkier outlook for the once rapid crisis . Growing area.
China’s post-lockdown economic recovery lost momentum earlier than expected, the IMF said.
Meanwhile, the strength of the U.S. economy has provided less support to Asia than in the past because it has been focused on the services sector, which is not driving demand for exports, the fund said in a blog about the region’s outlook.
“In the near term, the sharp adjustment in China’s heavily indebted real estate sector and the resulting slowdown in economic activity will likely impact the region, particularly commodity exporters with close trade ties to China,” it said.
“On the other hand, a prolonged housing crisis and a limited policy response in China would exacerbate the regional downturn.”
A sudden tightening in global financial conditions could lead to capital outflows and weaken exchange rates in Asia, the blog added.
In its global economic outlook released this week during the IMF’s annual meetings in Marrakech, the IMF cut Asia’s growth estimate next year to 4.2% from 4.4% in April, lower than the forecast of 4.6% for this year.
“Although Asia will still account for about two-thirds of total global growth this year, it is important to note that growth will be significantly lower than forecast before the pandemic,” the IMF said.
In Japan, the central bank’s policy changes to control bond yields led to widespread “spillover effects” on the market due to the greater presence of Japanese investors in the global bond market, the blog said.
Such impacts could “become greater in the event of a more substantial normalization of monetary policy.”
The Bank of Japan (BOJ) had kept the cap on the country’s 10-year bond yield at around zero to support a fragile economy.
As central banks around the world tightened monetary policy to combat rising inflation and rising global commodity prices pushed up domestic inflation, the BOJ began gradually easing the yield cap last year in what was widely seen as moves by markets to end their massive economic stimulus program.
Some analysts say a sweeping interest rate hike in Japan, not seen in nearly two decades, could upend financial markets by driving up financing costs for companies and investors around the world.
Reporting by Leika Kihara; Edited by John Stonestreet
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