MANILA, Philippines - This year’s growth forecast for Southeast Asia has been retained but next year’s outlook was cut by the International Monetary Fund (IMF), which noted a “worse” second quarter that is expected to slow global growth throughout the year.
ASEAN-5 – Indonesia, Malaysia, the Philippines, Thailand and Vietnam – will grow by 5.4 percent this year, the IMF said, unchanged from its last forecast in April.
A 2013 growth outlook of 6.1 percent was also provided for the region in the latest World Economic Outlook Update (WEO) released yesterday. This figure, however, was slower than the 6.2 percent predicted three months ago.
No latest projections were given for the Philippines alone. Last April, the IMF said it expects the country’s economy to grow 4.2 percent this year and 4.7 percent in 2013.
“The baseline projections in this WEO Update incorporate weaker growth through much of the second half of 2012 in both advanced and key emerging market economies, reflecting the setbacks to the global recovery,” the report stated.
The world economy grew 3.6 percent in the first quarter, which the IMF said was slightly above expectations. Still, global output is seen to expand at a slower 3.5 percent this year and 3.9 percent in 2013.
Growth in emerging nations, which include ASEAN-5, is expected to moderate to 5.6 percent this year before picking up to 5.9 percent next year. Both forecasts were 0.1 and 0.2 percentage point lower from April.
“For Asia, growth was also pulled up by a greater-than-anticipated rebound in industrial production, spurred by the restart of supply chains disrupted by the Thai floods in late 2011, and stronger-than-expected domestic demand in Japan,” the report stated.
“Developments during the second quarter, however, have been worse. Relatedly, job creation has been hampered, with unemployment remaining high in many advanced economies, especially among the young in the euro area periphery,” it added.
This has caused stress on mostly export-driven emerging economies, the report said, which, after experiencing slowing growth, had resorted in easing interest rates to free up more resources to boost growth.
Exports of emerging and developing nations are seen growing 5.7 percent this year and 6.2 percent in 2013, significantly lower than April forecasts of 6.8 percent and 7.2 percent, respectively.
Effects of policy easing are expected to be felt at the second half, the report stated, nevertheless, “concerns remain that potential growth in emerging economies might be lower than expected.”
It said policymakers should be ready to adjust policies given volatilities in the world market. “That said, the need for and the nature of the desirable policy response vary considerably across emerging market economies because of differences in their cyclical positions,” the report said.