Will Asia Pacific Region Witness Collapse in Growth Prospects?

By Consultants Review Team Friday, 13 October 2023

Economists at the International Monetary Fund cautioned that the Asia Pacific area, whose economy is already showing signs of flagging, could face less growth prospects as a result of China's real estate industry collapse.

IMF economists Yan Carrière-Swallow and Krishna Srinivasan wrote in a report released on Friday that "in the near term, the sharp adjustment in China's heavily indebted property sector and the resulting slowdown in economic activity will likely spill over to the region, particularly to commodity exporters with close trade links to China."

Growing geopolitical challenges are also facing the region as some countries want to diversify their supply chains and move demand inward.

In the Asian economies most directly linked to China's economy, they stated, "output could decline by up to 10 percent over five years in a downside scenario where "de-risking" and "re-shoring" strategies take hold."

The IMF had earlier cut its growth prediction for the area for the upcoming year, bringing it down from an April estimate of 0.2 percentage points to 4.2%. The projection for 2023 has increased from 3.9% to 4.6%.

"We have a less optimistic assessment due to third-quarter growth and investment slowdowns, which partly reflect weaker external demand as the global economy slows down, particularly in Southeast Asia and Japan, as well as China's faltering real estate investment," they stated.


Current Issue