The IMF's latest economic assessment for Asia and the Pacific highlights rising downside risks to growth in the context of a synchronized global slowdown. Growth in Asia softened in the first half of 2019, driven by a pronounced decline in fixed investment and exports. Consumption largely held up, helped by supportive policies across the region.
In India, growth decelerated sharply in recent quarters but is set to strengthen from 6.1 percent in fiscal year 2019 to 7 percent in 2020, supported by recent monetary policy stimulus and the announced corporate income tax reduction.
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The report finds that Asia is projected to grow at 5 percent in 2019 and 5.1 percent in 20200.4 and 0.3 percentage point lower than projected in April. This would constitute the slowest pace of expansion since the global financial crisis. Downward revisions for growth in Asia are larger than for the global average and particularly pronounced in investment and trade. Nonetheless, Asia still remains the fastest-growing major region in the world, accounting for more than two-thirds of global growth in 2019. China alone accounts for 39 percent of global growth, India 16 percent, and ASEAN 10 percent.
Asia's near-term policy priorities should aim at preventing a sharp growth slowdown, while reducing vulnerabilities. Efforts to diffuse trade tensions through multilateral approaches need to continue. Fiscal policy should seek to support domestic demand where this is needed and where there is policy spacefor instance in Thailand and Korea. For countries like India with already high debt levels, fiscal consolidation should be prioritized to rebuild buffers. In China, additional fiscal support to cushion the impact from tariff increases would be appropriate to stabilize growth.
Monetary policy in the region can be generally accommodative, but calibrated to local circumstances. Where inflationary pressures are subdued and growth is softeningIndia, Korea, Philippines and Thailandan accommodative policy is desirable. In Japan, improved market communications and further strengthening of the monetary policy framework could help lift inflation expectations.
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