Things may take a positive turn only if the US economy achieves a soft landing, boosting the outlook for manufacturing and capital expenditures, the technology cycle bottoms out, and disinflation in Asia accelerates to provide scope for easing monetary policy in 2024, the IMF said.
However, medium-term prospects are uncertain due to geo-economic fragmentation, with de-risking policies of major economies creating a potentially significant impact on growth, it said.
While inflation is expected to ease in 2024, IMF advised central banks to ensure that inflation remains durably at appropriate targets.
It said that in Asia’s advanced economies – which include Australia, New Zealand, Japan, Hong Kong, South Korea, Taiwan and Singapore – tight financial conditions as represented by high interest rates will hold back demand, while the outlook for exports will depend on price movements of global commodities and the technology cycle.
The Chinese economy, which is expected to expand by 5 per cent in 2023, will slow to 4.2 per cent in 2024, mainly reflecting renewed weakness in the property sector.
The IMF said that due to strong business investment and resilient consumption growth, US growth for 2023 and 2024 was upgraded in the October 2023 World Economic Outlook by 0.5 per cent and 0.4 per cent, respectively, compared with April.
“While the large upgrade to US growth compared to a smaller downgrade for China would normally be a net positive for the region, the composition of US demand may mean that Asia will benefit less this time.”
Also, the demand for electronic goods has moderated as an upturn of the technology cycle appears to be delayed, while de-risking policies by major economies are reorienting demand for goods towards domestic instead of imports, said IMF.