IMF cuts growth forecasts for Asia Pacific region

Asia continues to be the most dynamic part of the global economy but the region was still being buffeted by multiple headwinds, the International Monetary Fund said in a report in which it trimmed its forecasts.

The Washington-based lender reduced its forecast for growth in the Asia-Pacific region in 2016-2017 to 5.25%, down from a previous forecast for growth of 5.4%.

Domestic demand, especially consumption, would be the main driver of the expansion in region, propelled by robust labour market conditions, lower prices for commodities and growth in disposable income together with macroeconomic stimulus in some jurisdictions, the IMF said.

Adverse spill-over effects from China´s re-balancing away from a pattern of growth led by investment and towards consumption might have 'spillover' effects in the near-term, the Fund´s economists said.

However, over the medium-term they expected the country´s transition to benefits for growth.

In its report the IMF also called attention to the negative impact from commodity price declines on many exporting countries, but only part of the decline in prices could be attributed to Chinese rebalancing.

It also warned of a risk that Japan might fall into an overreliance on monetary policy should global growth slowdown further.

Domestic political and international geopolitical tensions might also cause significant trade disruptions, giving way to a "generalised slowdown" as was the possibility that the perennial risk of natural disasters might metarialise.

Frontier economies and Pacific island countries were particularly at risk.

To adress the above challenges, the IMF pointed out the positive contribution that regional and multilateral trade agreements could make and the need for 'high-impact' reforms to foster greater economic and trade diversification in the region and its entry into global markets.

Such reforms included those of state-owned enterprises in China, labour and product reforms in Japan and removing bottlenecks in India and elsewhere in the region.