Washington, May 2: The risks of greater trade fragmentation in the Asia Pacific region are becoming more noticeable, the International Monetary Fund (IMF) said in a report.
“Risks of further global trade fragmentation are becoming more salient,” the IMF said in its Regional Economic Outlook for Asia and the Pacific on Monday.
The risks fueling the ongoing trade disputes between the United States and China include the new restrictions on trading high-tech products and the heightened geopolitical tensions linked to the conflict in Ukraine, the report said.
The IMF warned in the report that Asia remains especially vulnerable to reduced cross-border trade flows and foreign direct investment.
A potential reduction could be effected by the world fragmenting into multiple blocs, with Asia’s exporters heavily exposed to China, Europe and the United States, the report said.
“Meanwhile, the medium-term slowdown in productivity and investment in China – which could sharpen due to fragmentation pressures – may have profound and unanticipated adverse implications for the rest of the region,” the report said.
The impact on other Asian economies would depend on the degree of export exposure to China’s domestic demand and investment and on global value chains via China, the report said.
The IMF said it expects the region’s economic growth to increase to 4.6% in 2023 from 3.8% in 2022.
“This means the region would contribute around 70% of global growth. Asia’s dynamism will be driven primarily by the recovery in China and resilient growth in India, while growth in the rest of Asia is expected to bottom out in 2023, in line with other regions,” the report said.
At the same time, core inflation in the region will follow the global trend and continue to be persistent despite signs that it is easing, the report added.
The financial conditions in Asia have generally eased since last October despite the Asian central banks continuing their monetary tightening cycle, according to the report.
(UNI)
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