IMF says Asian economies under cosh as China’s property woes bite

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An aerial view shows the 39 buildings developed by China Evergrande Group that authorities have issued demolition order in Danzhou

An aerial view shows the 39 buildings developed by China Evergrande Group that authorities have issued demolition order, on the man-made Ocean Flower Island in Danzhou, Hainan province, China January 6, 2022. REUTERS/Aly Song/File Photo Acquire Licensing Rights

MARRAKECH, Morroco, Oct 13 (Reuters) – China’s weak recovery and the risk of a more protracted property crisis could further dent Asia’s economic prospects, the International Monetary Fund (IMF) said on Friday, warning of a cloudier outlook for the once fast-growing region.

China’s post-lockdown economic boost lost momentum earlier than expected, the IMF said.

Meanwhile the strength of the U.S. economy has offered less support to Asia than in the past because it has been focused on the service sector, which does not fuel demand for exports, the Fund said in a blog on the region’s outlook.

“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,” it said.

“On the downside, a more protracted real estate crisis and limited policy response in China would deepen the regional slowdown.”

In its World Economic Outlook released during the annual IMF meetings in Marrakech this week, the IMF cut next year’s growth estimate for Asia to 4.2% from 4.4% projected in April, and down from 4.6% forecast for this year.

“Any time China slows, it has a bearing on the global economy, notably …Asia,” Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, told a briefing in Marrakech on Friday.

While Asia is seeing inflation moderate sooner than other parts of the world, central banks there should not rush into cutting interest rates as core inflation remains “a bit sticky”, Srinivasan said.

“Central banks should stay the course,” he said, adding the conflict in the Middle East could be among factors that could push up inflation.

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