IMF cuts RP growth estimate to 4.7%

The International Monetary Fund (IMF) lowered its forecast for the country’s growth to 4.7 percent this year and 4.9 percent next year along with other Asian economies warning in a report released yesterday that the region faces risks due to fallout from the eurozone debt crisis and a slowdown in the United States.

In its twice-yearly Asia and Pacific Regional Economic Outlook, the IMF warned that risks for the region are “decidedly tilted to the downside.”

The IMF expects growth of 6.3 percent in 2011 and 6.7 percent in 2012 for Asia on average, slightly below its forecast of 6.8 percent and 6.9 percent, respectively, in April’s report.

It warned that an escalation in the eurozone crisis would have “clear macroeconomic and financial spillovers” to Asia, which has not “decoupled” from advanced economies and should develop stronger engines of domestic growth.

“The panic sell-offs across Asian financial markets and safe-haven flows into Japan that occurred when European troubles intensified in August-September 2011 demonstrate that there is ‘no place to hide’ when advanced markets come under pressure,” the IMF said.

“Since 2009 investors from advanced economies have built up substantial positions in Asian markets, including Indonesia and other Asian sovereign debt markets,” it said.

“A sudden liquidation of these positions could trigger a loss of confidence, and contagion could spread from bond and equity markets to currency and other markets.”

The report came on a day data showed Thursday China’s trade surplus narrowed in September as exports slowed sharply, with the world’s second-largest economy hit by economic turmoil in the United States and Europe.

The IMF slightly lowered its growth forecast for China to 9.5 percent in 2011 from April’s forecast of 9.6 percent and 9.0 percent in 2012 from 9.5 percent.

The fund’s Asia and Pacific Department director Anoop Singh warned China faced the risk of an overheating property market if Beijing failed to extend more savings options to households.

“Financial sector reform is very important, together with other policies, to ensure that these risks do not materialize,” he told a Tokyo press conference.

Nevertheless, Singh said the scale of the shock was much less than in 2008 in percentage terms across Asian markets and that fund flows would eventually return. –Daily Tribune