IMF: THE RISKS IN ASIA ARE “DECIDEDLY TILTED TO THE DOWNSIDE”
The IMF’s update on Asian growth includes some cautious commentary and a healthy downgrade of Asian growth. They now see 6.3% growth compared to a previous estimate of 7%. They say the risks are “decidedly tilted to the downside” as the macroeconomic weakness in the USA and Europe spill over into Asia:
“Growth in Asia has moderated since the second quarter of 2011, mainly reflecting a weakening of external demand. Domestic demand is still resilient, and it should continue to sustain activity across the region, contributing to relatively robust growth of 6.3 percent in 2011 and 6.7 percent in 2012 on average, slightly below our forecast last April. In Japan, the tragic earthquake and tsunami earlier this year had grave social and humanitarian costs and also set back the recovery; however, domestic demand is picking up as reconstruction efforts get under way and growth is expected to reach 2.3 percent next year. Meanwhile, inflation pressures have been elevated in a number of other Asian economies amid accommodative financial conditions, but should recede as food and energy prices gradually moderate.
Nevertheless, the report cautions that risks for the Asia and Pacific region are decidedly tilted to the downside. An escalation of the euro area financial turbulence and a more severe slowdown than anticipated in the United States would have clear macroeconomic and financial spillovers to Asia. While domestic demand remains strong, “Asia has clearly not “decoupled” from advanced economies,” the IMF says.”
You can read the full report here.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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4 Comments
I would expect the growth in China somewhat settling around 7-8%. 10-11% growth is clearly not sustainable and has been putting too much strains on energy which is a bottleneck for China. Huge pollution issues with hundreds of so-called “cancer villages” emerged due to rapid industrial development.
I have seen heavy investment in the R&D in almost every field which will bear the fruits in about 10-15 years.
Chinese economic collapse is fantasy of many media here. You would have to go there to learn the facts.
In the near term, China needs to overcome the wrong policy adopted by Wen Jiabao following US to QE the economic during 2008-09, together with the weak external demand. My source told me that China is not planing to rescue any country this round, in stead they will wait for the collapse of the global economic to buy up the high tech industries abroad.
The reported chinese growth is still high but then one has to subtract the inflation and then growth is at near zero or below.
China needs to adapt an economic policy that’s more focussed more on domestic consumption and not on export only. The current policy is the socalled “”asian growth model”" and that leads to huge incentives to build production capacity for the exporting sector. But that assumes foreigners will continue to buy their production. And precisely that is not very likely in the next, at least, say 5 to 10 years.
you are misinformed about chinese gdp growth rates. the nominal rate is 15+%, with the real growth rate around 8-9%
The IMF said something more. They said that european banks have a much larger presence in Asia and Australia than US banks. So, when european banks are getting deeper into trouble then they will cut lines of credit and that will have a MAJOR negative impact on those economies as well.