Developing Asia 2021 growth upgraded to 8.3% on improved India outlook - IMF

Author: Nurluqman Suratman

2021/01/27

SINGAPORE (ICIS)--The International Monetary Fund (IMF) late on Tuesday lifted its 2021 growth projection for the emerging and developing Asia region to 8.3% from its previous projection of 8.0% after upgrading India's economic outlook for the year.

India's economy is now expected to grow by 11.5% in 2021, up 2.7 percentage points from the previous projection of a 8.8% growth, "reflecting the carryover from a stronger-than-expected recovery in 2020 after lockdowns were eased", it said.

India's economy was estimated to have contracted by 8.0% in 2020, according to IMF data.

China will continue to support the region's growth outlook with its economy projected to expand by 8.1% in 2021 and 5.6% in 2022, the IMF said in its latest World Economic Outlook report.

"Considerable differentiation is expected between China—where effective containment measures, a forceful public investment response, and central bank liquidity support have facilitated a strong recovery—and other economies," the IMF said.

China is expected to maintain its pledge to avoid any sharp shift in its monetary policy due to the worsening coronavirus situation in China," Japan's Nomura Global Markets Research said.

"We expect neither hikes nor cuts to policy rates and the reserve requirement ratio (RRR) in 2021," it said.

To cope with the worsening coronavirus situation ahead of the Lunar New Year holiday in February, the Chinese government has tightened social distancing measures, reimposed some locally-based lockdown measures and travel bans.

It has encouraged migrant workers to celebrate the spring festival in the cities of their workplaces or current residences, the research firm said.

"We believe these policy measures will weigh on activity in the services sector, especially the hospitality industry, while providing a slight boost to industrial production and construction in South China on earlier-than-usual business resumptions after the LNY holiday," Nomura said.

ASEAN's economic growth was lowered to 5.2% in 2021 from the previous projection of growth of 6.2%.

Economic growth in Southeast Asia remains under pressure as COVID-19 outbreaks and containment measures continue, particularly in Indonesia, Malaysia, and the Philippines, the Asian Development Bank said in December last year.

The IMF raised the global economic growth forecast to 5.5% in 2021, up 0.3 percentage point from the previous forecast, reflecting expectations of "vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies".

The global economy is estimated to contract by 3.5% in 2020, up 0.9 percentage point higher than projected in the previous forecast on the back of the stronger-than-expected momentum in the second half of 2020, the IMF said.

"Multiple vaccine approvals and the launch of vaccination in some countries in December have raised hopes of an eventual end to the pandemic," it said.

The Economist Intelligence Unit in a report released on Wednesday said that the bulk of the adult population in advanced economies will be vaccinated by mid-2022.

"For middle-income countries, this timeline will stretch to late 2022 or early 2023. For poorer economies, mass immunisation will take until 2024, if it happens at all," it said.

IMF's economic outlook projections (% change)

2020 2021 2022
World Output -3.5 5.5 4.2
Advanced Economies -4.9 4.3 3.1
United States -3.4 5.1 2.5
Euro Area -7.2 4.2 3.6
Germany -5.4 3.5 3.1
France -9 5.5 4.1
Italy -9.2 3 3.6
Spain -11.1 5.9 4.7
Japan -5.1 3.1 2.4
United Kingdom -10 4.5 5
Canada -5.5 3.6 4.1
Other advanced economies -2.5 3.6 3.1
Emerging Markets/Developing Economies -2.4 6.3 5
Emerging and Developing Asia -1.1 8.3 5.9
China 2.3 8.1 5.6
India -8 11.5 6.8
ASEAN-5 -3.7 5.2 6
Emerging and Developing Europe -2.8 4 3.9
Russia -3.6 3 3.9
Latin America and the Caribbean -7.4 4.1 2.9

Focus article by Nurluqman Suratman

Image: A container ship is docked at a port during a sunset in Osaka, western Japan. (Photo by Andy Wong/AP/Shutterstock)

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