The International Monetary Fund (IMF) issued a cautionary statement on Friday, highlighting the heightened risks to Asia’s economy stemming from escalating trade tensions, challenges in China’s property sector, and the potential for increased market volatility.
The financial agency emphasized continued downward price pressures from China could potentially escalate trade tensions by negatively impacting sectors in neighboring countries that share similar export structures and advised Beijing to focus on a demand-driven economic recovery by supporting the property sector and bolster private consumption.
While the IMF forecasts Asia’s economy to grow by 4.6% in 2024 and 4.4% in 2025, citing looser monetary policies globally boosting private demand next year, it also cautioned that risks remain tilted to the downside due to past monetary tightening and geopolitical tensions.
At the recent annual meetings between the IMF and the World Bank, discussions around issues such as low growth, high debt, and escalating conflicts took center stage. However, finance leaders also expressed significant apprehension about the potential repercussions of a scenario where Donald Trump returns to power in the upcoming November 5 U.S. presidential election.
Trump’s proposed policies, including a 10% tariff on imports from all nations and a 60% tariff on imports from China, are causing alarm among analysts, who warn that such measures would disrupt supply chains on a global scale.
In addition, the IMF has cautioned that recent market volatility may hint at future instability, as markets adjust to the possibility of significant interest rate cuts by the U.S. Federal Reserve and gradual rate hikes by the Bank of Japan.
The report highlights the potential for abrupt shifts in exchange rates, which could impact various financial market sectors and potentially undermine consumer confidence and investment.
The IMF projected a slowdown in China’s economic growth, anticipating a 4.8% expansion in 2024, which is up 0.2 percentage points from its April forecast but still below the previous year’s growth of 5.2%. This projection falls slightly short of China’s own growth target, which is set at around 5.0% for 2024, while the agency further expects the growth rate to decelerate to 4.5% in 2025.
