Asia Holding Firm Despite Slowing Global Demand

Lower external demand results in slower growth for Asia

Asia remains vulnerable to financial contagion from Europe

Most economies have room for strong policy response in event of further slowdown

“Exports [in Asia] lost momentum in the face of weaker growth from regional and global trading partners, but robust domestic demand has, so far, helped offset the drag on growth,“ said Anoop Singh, head of the Asia and Pacific region for the IMF, during a press briefing on the economic outlook for Asia.

Asia is heavily dependent on trade for its growth and, although up till now, the region has managed to fend off the worst effects of the euro debt crisis, Singh warned that a further deterioration in global financial conditions could have significant, negative knock-on effects.

“Clearly Asia would be greatly affected as standard trade-channel effects would combine with confidence effects and contagion in the financial sector to produce large and tangible spillovers to domestic demand,” said Singh.

Slowing global economy mirrored in Asian markdown

The IMF expects growth in Asia to remain close to 6 percent this year, and then to gradually recover to about 6½ percent in 2013.

These projections follow last week’s release of the IMF’s latest World Economic Outlook which saw a reduction in expected global growth to 3.3 percent for this year—down ¾ percentage points since its last projections in September. This has had a negative impact on growth expectations for Asia.

The IMF expects developing Asia to grow at 7.3 percent this year. It had originally projected this figure to be 8 percent, and although China is predicted to grow at a robust 8.2 percent in 2012, this is still 0.8 percentage points down on expectations from last year.

Room for policy response

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