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Financial News: IMF Says Uncertain US Policy, China Rebalancing Pose

IMF Says Uncertain US Policy, China Rebalancing Pose Risks To Asia Outlook

06/05/2017 - 07:57:00 (RTTNews)

(RTTNews) - Asia is projected to sustain its robust growth momentum this year and next, though the unclear U.S. economic policy and the shift in China's growth model to a domestic demand driven one pose significant challenges to the region's bright outlook, the International Monetary Fund Deputy Managing Director Mitsuhiro Furusawa said Monday.

"Asia continues to be the world leader in growth helped by stronger demand and accommodative policies," Furusawa said in a speech in Tokyo.

The IMF expects region's growth to reach 5.5 percent this year and 5.4 percent in 2018.

However, the near-term outlook is clouded with significant uncertainties and risks, the IMF official said.

"A key uncertainty is the lack of clarity about U.S. economic policy, including the size and composition of an expected fiscal stimulus," Furusawa said.

The top IMF official said a faster-than-expected increase in interest rates in the US and significant appreciation of the dollar could exacerbate public debt vulnerabilities in Asia's emerging and developing countries.

"China's rebalancing process continues; but growth remains reliant on rapid domestic credit growth that could cause problems down the road," Furusawa said.

Other risks that threatens the bright outlook for Asia include global politics and rising geopolitical tensions in the region, the IMF official said. He noted that the upcoming elections in Europe and the party congress in China add to uncertainties.

Furusawa also cautioned that the rising income inequality in most Asian countries could hamper the pace and sustainability of growth and lead to a more challenging political climate.

Demographic change in the region, which is marked by slowing population growth and aging, puts many Asian countries at risk of growing old before becoming rich, he said.

"This demographic transition could have a significant impact on growth prospects and future fiscal burdens for governments," Furusawa said.

He urged governments to adapt fiscal policies before aging sets in, stressing that this should occur at a gradual pace in order to spread the burden across generations and to avoid policy reversals.

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