Asia Pacific growth in 1H lowest since 2008; recovery facing challenges

The IMF on Friday revealed that Asia Pacific region’s growth in the first half of this year was the lowest since 2008 and recovery will be modest posing fresh challenges.

“Growth in the Asia-Pacific region has slowed. External headwinds played a major role, as the recovery in advanced economies suffered setbacks. Weaker momentum in China and India also weighed on regional economies.

For Asia as a whole, GDP growth fell to its lowest rate since the 2008 global financial crisis during the first half of 2012,” IMF said in its Asia and Pacific Regional Economic Outlook – October 2012 Update released on Friday ahead of the plenary of 2012 IMF-World Bank annual meetings in Tokyo.

IMF said with inflationary pressures easing, macroeconomic policy stances remained generally supportive of domestic demand and in some cases were eased further in response to the slowdown.

“More broadly, financial conditions remain accommodative, and capital inflows have resumed. Going forward, growth is projected to pick up very gradually, and Asia should remain the global growth leader, expanding over two percentage points faster than the world average next year. However, considerable downside risks remain, in particular with regard to the euro area crisis,” the IMF said.

It emphasised that the priorities for policymakers are to support noninflationary growth, maintain financial stability, and remain responsive to weaker-than-expected outcomes. “Refocusing structural and fiscal reform efforts toward sustained and more inclusive growth remains a priority,” the Asia and Pacific Regional Economic Outlook – October 2012 Update added.

Earlier in the week IMF via its World Economic Outlook October Update revised down its forecast for growth this year to 3.3% and 3.6% in 2013 saying that recovery has suffered new setbacks and uncertainty weighs heavily on the outlook.

Relative to IMF’s April forecast, the growth estimate for 2013 has been revised from 1.8% down to 1.5% for advanced countries and from 5.8% down to 5.6% for emerging and developing countries.