The International Monetary Fund has raised its growth forecast for the Asia Pacific region to 5.5 per cent in 2017, but warned that the near-term outlook for the region is “clouded with significant uncertainty”, adding that medium-term growth faced difficulties from a slowdown in productivity growth in both advanced economies and China.
In its new Regional Economic Outlook for Asia and the Pacific, published today, the fund said the region’s prospects “remains robust – the strongest in the world, in fact – and recent data point to a pickup in momentum.”
That pickup prompted the IMF to raise its growth forecast for the region to 5.5 per cent for 2017, up from a pace of 5.3 per cent growth projected in October 2016.
It revised 2017 growth projections for China and Japan upward to 6.6 per cent and 1.2 per cent, respectively, based mainly on continued policy support and strong recent readings from indicators such as purchasing managers’ indices. However, it revised its outlook for India downward to 7.2 per cent, due to the temporary effects of its demonetisation drive, as well as for South Korea, to 2.7 per cent, based on political uncertainty.
While it expected medium-term slowdown in growth from China to be partially offset by an uptick from India, it noted that “the risks to the outlook, on balance, are still tilted to the downside” and said medium-term growth for the region “faces secular headwinds”.
It noted that a slowdown in productivity growth since the financial crisis has been most severe not only in advanced economies in the region, but in China as well. It warned that without reforms, “productivity growth will likely remain low for some time, with headwinds from rapid aging becoming increasingly important.”