(Yicai Global) July 6 -- The Asian economy is expected to shrink by 1.6 percent this year instead of remaining stable as the pandemic affects trade and tourism, according to the director of the International Monetary Fund's Asia and Pacific department.
Asia has been able to control the virus better than many other regions in the first quarter but the global situation has gotten worse, Changyong Rhee said at a seminar jointly organized by the IMF, Yicai Research Institute, Yicai Global, and the Shanghai Advanced Institute of Finance on July 2. In April, the IMF predicted Asia's gross domestic product to remain the same as in 2019.
Amid risks of further outbreaks, Asian countries should use their fiscal stimulus wisely to accelerate their economic reforms, including those involving monetary and fiscal policies, resource allocation, and social security, Rhee added.
Asia relies heavily on international trade so it cannot avoid the global downside risks, said Rhee. A case in point: the IMF predicts the eurozone's GDP to shrink by 10.2 percent this year and that of the US by 8 percent. As a result, the total trade volume of Japan, India, and the Philippines should fall by about 20 percent.
But not all of the uncertainties stem from far-flung places. Asian countries need to deal with increased inequality, weakened household spending, smaller corporate balance sheets, and geopolitical tensions, according to the director.
The IMF expects Asia's economic growth to rebound to 6.6 percent next year. However, due to the long-term impacts of the pandemic, the region's GDP should be about 5 percent less than what it could have been without the pandemic in 2022, Rhee added.
The global lockdown measures cause economies to narrow by about 12 percent every month while ending those limitations would only increase economic activities by about 7 percent because consumer behavior has changed amid social distancing brought forth by the pandemic, according to the multilateral organization.
Editor: Dou Shicong, Emmi Laine