MANILA, Philippines – The International Monetary Fund (IMF) has cut its economic growth forecast for the Association of Southeast Asian Nations (ASEAN 5) due to the escalating debt crisis in the euro zone.
In its latest World Economic Outlook, the IMF said the sub-regional grouping ASEAN 5—comprising the Philippines, Indonesia, Malaysia, Thailand and Vietnam—would post an average growth of 5.2 percent this year, lower than the original projection of 5.6 percent. It also lowered its 2013 growth projection for the region to 5.6 percent from the original 5.8 percent.
“The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere. Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated,” the IMF stressed.
The IMF also lowered its world economic growth forecast to 3.3 percent instead of four percent this year and to 3.9 percent instead of 4.5 percent next year.
“This is largely because the euro area economy is now expected to go into a mild recession in 2012 as a result of the rise in sovereign yields, the effects of bank deleveraging on the real economy, and the impact of additional fiscal consolidation,” the IMF said.
The latest update lowered the GDP growth projection of advanced economies by 0.7 percent to 1.2 percent instead of 1.9 percent this year and by 0.5 percent to 1.9 percent instead of 2.4 percent for next year.
The IMF retained the GDP growth target of the US at 1.8 percent this year but lowered next year’s growth forecast to 2.2 percent instead of 2.5 percent.
Likewise, the IMF sees the GDP of the European Union contracting at a slower pace of 0.5 percent instead of 1.6 percent this year before recovering with a softer growth of 0.8 percent instead of 1.5 percent next year.
“Global growth prospects dimmed and risks sharply escalated during the fourth quarter of 2011, as the euro area crisis entered a perilous new phase,” the IMF said.
The IMF reported that the world economic output expanded by 3.5 percent as of end third quarter of last year and likely posted an annual GDP growth of 3.8 percent in 2011 as growth in advanced economies led by the US surprised on the upside.
“Growth in the advanced economies surprised on the upside, as consumers in the United States unexpectedly lowered their saving rates and business fixed investment stayed strong. The bounce back from the supply-chain disruptions caused by the March 2011 Japanese earthquake was also stronger than anticipated,” it said.
The IMF said growth in emerging and developing economies is also expected to slow because of the worsening external environment and a weakening of internal demand.
“The most immediate policy challenge is to restore confidence and put an end to the crisis in the euro area by supporting growth, while sustaining adjustment, containing deleveraging, and providing more liquidity and monetary accommodation,” the IMF said.
The agency lowered its GDP growth target for emerging and developing economies by 0.7 percent to 5.4 percent instead of 6.1 percent this year and by 0.6 percent to 5.9 percent instead of 6.5 percent next year.
For developing Asia, the IMF slashed its growth forecast to 7.3 percent instead of eight percent this year and to 7.8 percent instead of 8.4 percent next year.
The economic expansion of China is expected to slow to 8.2 percent instead of nine percent this year and to 8.8 percent instead of 9.5 percent next year.
“The updated WEO projections see global activity decelerating but not collapsing. Most advanced economies avoid falling back into a recession, while activity in emerging and developing economies slows from a high pace,” the IMF said. –Lawrence Agcaoili (The Philippine Star)
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