ASIA is set to grow at 4.5 per cent in 2024, up from October’s projection of 4.2 per cent, said the International Monetary Fund (IMF) at its regional economic outlook update for Asia and the Pacific on Wednesday (Jan 31).

The continent remains on track to drive about two-thirds of global growth in 2024, as it did last year, said the Washington-based fund.

Its upward revision of 0.3 percentage point for Asia’s growth rate is due to positive momentum carried forward from 2023, sizeable policy stimulus announced by countries such as China and Thailand, and robust external demand.

“A more supportive external environment, notably robust growth in the US, reinforces domestic resilience,” said Krishna Srinivasan, director of IMF’s Asia and Pacific department, in Tokyo, Japan.

“Demand for technology – computers, electronics and optical products – has picked up in recent months, which benefits economies such as (South) Korea and Singapore.”

That said, the regional average hides significant divergences between countries, he noted.

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For example, while growth in India is anticipated to remain strong at 6.5 per cent this year and the next, that in Japan is projected to slow to about 1 per cent this year, from 2 per cent in 2023.

Japan’s growth is expected to remain above potential, but is due to decelerate as one-off factors – such as a depreciated yen, strong tourism and a recovery in business investment – that bolstered activity in 2023 fade, said Srinivasan.

For 2025, IMF expects growth to “decelerate mildly” to 4.3 per cent, reflecting to a large extent China’s growth slowdown.

Global growth

Expanding to the world economy beyond Asia, IMF projects a 3.1 per cent growth for this year – same as in 2023 – and 3.2 per cent in 2025.

The fund released its latest World Economic Outlook report on Tuesday.

While the revised figure stands as an improvement from October’s forecast, it remains significantly below the historical – 2000 to 2019 – average of 3.8 per cent.

That said, global growth has proven surprisingly resilient, said IMF.

“Stronger private and government spending upheld demand in 2023, despite tight monetary conditions,” noted Srinivasan. “On the supply side, higher labour-force participation, the unwinding of supply-chain bottlenecks and lower energy prices all supported activity.”

Inflationary pressures

On the upside, prospects for a soft landing have improved as inflationary pressures across Asia abate.

Post-pandemic price pressures – already on average less intense than elsewhere to begin with – are receding rapidly. Many regional central banks are on course to reach their inflation targets this year, said Srinivasan.

“Provided policymakers hold steady until inflation is firmly re-anchored, scope for monetary easing may emerge later in the year,” he said.

On that point, the risk remains that divergent monetary stances in the US and Asia would set off sharp exchange rate movements this year, he warned.

He added that should that happen, central banks should “avoid being distracted by temporary turbulence and focus firmly on price stability”.

Zooming out to the world economy, IMF expects global inflation to fall to 5.8 per cent in 2024 and further to 4.4 per cent in 2025, from 6.8 per cent in 2023.