SINGAPORE: International Monetary Fund (IMF) economists said on Tuesday (Jan 31) that Singapore and other Southeast Asian economies are seeing downgrades to their 2023 growth outlooks because slowing global growth will outweigh the positive impact from China’s economic reopening.
Chief economist Pierre-Olivier Gourinchas told a news briefing on the IMF’s latest global growth forecasts these forces prompted the IMF to reduce Singapore’s gross domestic product (GDP) growth outlook for 2023 to 1.5% from a 2.3% forecast issued last October.
IMF’s 2023 forecast for Asean-5 – Singapore, Malaysia, Vietnam, Indonesia and the Philippines – was cut to 4.3% from 4.5% in the October forecast. The fund’s 2024 forecast was also cut by 0.2 percentage point to 4.7%.
Daniel Leigh, division chief of the research department at the IMF, told Reuters that Asean’s rapid growth in 2022 of 5.2% was a one-off, while noting the surprising speed that China had reopened this year.
“It was just six months ago, we were talking about lockdowns and so on. They’ve just made a very rapid shift,” Leigh said, noting how this had quickly translated to visible numbers like bookings with the potential to raise growth in the tightly integrated Southeast Asian region.
Still, he noted that geopolitical fragmentation was a negative for the outlook for everyone, even though economies like Vietnam benefited from supply chains relocating out of China. Vietnam’s economy grew 8% in 2022, though the IMF expects growth to slow to 5.8% this year as authorities address inflation.
The IMF raised its 2023 global growth outlook slightly due to “surprisingly resilient” demand in the United States and Europe, an easing of energy costs and the reopening of China’s economy after Beijing abandoned its strict Covid-19 restrictions.
The IMF said global growth would still fall to 2.9% in 2023 from 3.4% in 2022, but its latest World Economic Outlook forecasts mark an improvement over an October prediction of 2.7% growth this year with warnings that the world could easily tip into recession.
For 2024, the IMF said global growth would accelerate slightly to 3.1%, but this is a tenth of a percentage point below the October forecast as the full impact of steeper central bank interest rate hikes slows demand.
Gourinchas said recession risks had subsided and central banks are making progress in controlling inflation, but more work was needed to curb prices and new disruptions could come from further escalation of the war in Ukraine and China’s battle against Covid-19.
“We have to sort of be prepared to expect the unexpected, but it could well represent a turning point, with growth bottoming out and then inflation declining,” he told reporters of the 2023 outlook.
In its 2023 GDP forecasts, the IMF said it now expected US GDP growth of 1.4%, up from 1.0% predicted in October and following 2.0% growth in 2022. It cited stronger-than-expected consumption and investment in the third quarter of 2022, a robust labor market and strong consumer balance sheets.
It said the eurozone had made similar gains, with 2023 growth for the bloc now forecast at 0.7%, versus 0.5% in the October outlook, following 3.5% growth in 2022. The IMF said Europe had adapted to higher energy costs more quickly than expected, and an easing of energy prices had helped the region.
Britain was the only major advanced economy the IMF predicted to be in recession this year, with a 0.6% fall in GDP as households struggle with rising living costs, including for energy and mortgages.
The IMF revised China’s growth outlook sharply higher for 2023, to 5.2% from 4.4% in the October forecast after “zero-Covid” lockdown policies in 2022 slashed China’s growth rate to 3.0% – a pace below the global average for the first time in more than 40 years. But the boost from renewed mobility for Chinese people will be short-lived.
The Fund added that China’s growth will “fall to 4.5% in 2024 before settling at below 4% over the medium term amid declining business dynamism and slow progress on structural reforms.” – Reuters