IMF Scales Back Southeast Asia Growth Forecast

By webadmin on 06:54 pm Jul 18, 2012
Category Archive

Dion Bisara

The International Monetary Fund has cut its forecast on the economic growth of five nations in Southeast Asia to better reflect faltering growth in the global economy.

Monday’s assessment, released in a report by the IMF, was the latest development institution to announce an assessment after the World Bank cut its economic growth forecast for next year.

The IMF cut the economic growth forecast for Indonesia, Malaysia, the Philippines, Thailand and Vietnam, which together are known as the Asean 5, to expand 6.1 percent in 2013, slightly lower that its earlier forecast of 6.2 percent.

It cut the global economic outlook for growth to 3.9 percent next year, from its previous forecast of 4.1 percent.

Still, the IMF, which loaned billions of dollars to Thailand and Indonesia during the 1997-98 Asian financial crisis with strict conditions, maintained the growth forecast for the year at 5.4 percent, unchanged from its forecast three months ago.

The forecasts could have been worse if assumptions there would be sufficient policy action in the euro area were untrue and recent policy easing in emerging market economies gained traction, the IMF said.

“Clearly, downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action,” the report said.

Growth in emerging markets is slowing, the IMF said, due to a weaker external demand, slowing domestic demand due to capacity constraints, while the countries have to cope with increases in investor risk aversion and perceived growth uncertainty, “which have led not only to equity price declines, but also to capital outflows and currency depreciation.”

Echoing similar concerns, Indonesia’s central bank, Bank Indonesia, cut its economic growth forecast for the country this year to 6.1 percent and 6.5 percent from the original range of 6.3 percent to 6.7 percent.