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Trade friction, market turmoil to hurt Asian growth: IMF

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NUSA DUA, Indonesia: Sustained trade tensions could slash Asia’s economic growth by up to 0.9 percentage point in coming years, the International Monetary Fund said, urging policymakers in the region to liberalise markets to offset the fall in export sales.


The IMF also warned in its twice-yearly report on the Asia Pacific region that the market rout seen in emerging economies could worsen if the US Federal Reserve and other major central banks tightened monetary policy more quickly than expected.


“Turmoil already seen in some emerging market economies could worsen, with negative spillovers to Asia through reduced capital flows and higher funding costs,” it said.


Changyong Rhee, director of the IMF’s Asia and Pacific Department, said there would be no winners in Asia from the global trade frictions, as other countries won’t be able to compensate fully for supply chain disruptions in China and the United States — the world’s top two economies.


“Today’s growth headwinds, from financial market tightening to trade tensions, could persist for some time,” he told a briefing on the report. “For this reason, it will be important for policymakers to save their ammunition for when it is truly needed,” he said. The IMF maintained its forecast that Asia’s economy will expand by 5.6 per cent this year but cut its projection for next year to 5.4 per cent, down by 0.2 point from April.


The downgrade was due to the impact of financial market stress and monetary tightening in some economies, as well as the damage from the tit-for-tat tariff actions between the United States and China, the IMF said.


Existing, proposed and new retaliatory tariffs could cause maximum gross domestic product (GDP) losses of 1.6 per cent in China and close to 1 per cent in the United States, it said. Other countries in Asia, many of which supply goods to China through global value chains, would also see their economies slow substantially, the IMF said. — Reuters


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