TOKYO – Asian economies will lead world growth in 2015, expanding at a 5.6 per cent pace that is level with last year, as recoveries in India and Japan help to offset the slowdown in China, the IMF said in a report Thursday.
IMF economists expressed concern, however, over the potential for weaker growth if policy makers in the region fail to follow through with needed changes, saying it was a time not for “alarm but it is a time for alert.”
The IMF’s regional economic outlook forecasts that growth in the Asia-Pacific area will moderate to 5.5 per cent in 2016.
Asian growth fell to 5.5 per cent in 2014 from 5.9 per cent in 2013, and is bound to shift lower as China’s economy, the world’s second largest, settles at a more sustainable level than the torrid double-digit pace of the past decade.
China’s report of 7 per cent growth in the first quarter of the year was in keeping with that trend.
“You cannot expect that a country can keep 10 per cent growth forever,” said Changyong Rhee, director of the IMF’s Asia and Pacific Department. “The current phase of growth is in line with our forecasts, but even if it’s a desirable slowdown it can have a negative impact on other countries.”
Rising levels of debt and potential financial market disruptions are other risks to growth, though moves by Chinese financial regulators to rein in margin trading and umbrella trusts are a positive step, he said in a news conference that was broadcast online.
On a broader scale, the IMF report said its estimates show lower oil prices could help boost global growth by 0.3 percentage points to 0.7 percentage points in 2015. Major producers of oil and other commodities are suffering from lower exports, but for countries such as Japan, China and Thailand the lower costs are a boon both for businesses and consumers.
Growth varies widely across the region, from 8.3 per cent forecast for 2015 in Myanmar, 7.5 per cent for India and 6.8 per cent for China to 1 per cent for Japan.
Japan, the world’s No. 3 economy, shows signs of recovering from a recession last year following an increase in the country’s sales tax to 8 per cent from 5 per cent.
The IMF’s report said that Japan’s growth will remain modest but could improve with more aggressive measures to improve productivity through improved labour laws and corporate governance.
Despite its slowdown, China remains a main driver of global GDP expansion, accounting for a larger share of world economic growth than the rest of Asia combined, the IMF said.
Reforms intended to make the state-dominated economy more productive, with stronger domestic consumption and services, and less dependence on trade and investment are crucial for future growth, Rhee said.
Full implementation of reforms would boost overall income by 5 per cent by 2020 over the economy’s performance without such reforms, he said.
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