China will provide impetus for global economic recovery

On May 2nd local time, the International Monetary Fund (IMF) released its latest "Economic Outlook for Asia and the Pacific" report, which showed that driven by the optimistic prospects of China and India, the Asia Pacific region will become the most dynamic major region in the world in 2023. Among them, the Chinese economy is expected to grow by 5.2%, and China will provide tremendous impetus for the recovery of the Asia Pacific and global economies.
The report points out that 2023 is a challenging year for the global economy. Despite weakening external demand and tightening monetary policy, internal demand in the Asia Pacific region remains strong, and a surge in consumption from China is driving growth throughout the region. The report predicts that the economic growth rate of the Asia Pacific region will increase from 3.8% in 2022 to 4.6% this year, an increase of 0.3 percentage points from the October 2022 forecast, indicating that the region's contribution to global economic growth will reach approximately 70%. The report shows that China's economy is recovering, and India's economic growth is also showing resilience, providing the main driving force for Asia's economic vitality.
In addition, the report predicts that other Asian economies will bottom out and rebound in 2023, consistent with the situation in other regions. Specifically, the report predicts that the economies of developed economies in the Asia Pacific region will grow by 1.6% in 2023, with Australia, Japan, and South Korea growing by 1.6%, 1.3%, and 1.5%, respectively. The economies of emerging markets and developing economies will grow by 5.3%, of which the economies of India, China, Indonesia and economy of Malaysia will grow by 5.9%, 5.2%, 5% and 4.5% respectively.
Regarding the growth of the Chinese economy this year, IMF President Georgieva once stated at the 2023 annual meeting of the China Development Forum in Beijing, "The strong rebound of the Chinese economy means that it will contribute about one-third of global economic growth in 2023, which will bring a welcome driving effect to the world economy." She said that in addition to directly promoting global economic growth, IMF analysis also shows that for every 1 percentage point increase in China's GDP growth rate, This will increase the average GDP growth rate of other Asian economies by 0.3 percentage points. In addition, Pierre Olivier Gulansha, Economic Advisor and Research Director of the IMF, recently stated that China's optimization and adjustment of epidemic prevention policies will help the Chinese economy rebound strongly, which is a significant benefit for the global economy and China will become a key engine of global economic growth.
Despite the vibrant economic outlook in the Asia Pacific region, it also faces enormous challenges. On the one hand, the pressure brought about by the weakening of global demand will have a negative impact on the economic outlook. Although overall inflation is decreasing, the data for most countries is still above the target level. On the other hand, although the spillover effects of banking turmoil in Europe and America have been relatively limited so far, the vulnerability brought about by the tightening global financial environment and market volatility remains high, especially in the corporate and household sectors. Therefore, the report predicts that the economic growth rate in the Asia Pacific region will decrease to 3.9% in five years, which is its lowest mid-term forecast in recent history.
At the same time, the outlook for the Asia Pacific economy is facing downward risks. The reasons include global and regional price pressures that may be more persistent, market expectations for monetary policy paths deviating from policy communication with major central banks, and further turbulence in global financial markets.
The report believes that countries should maintain a tight monetary policy stance until inflation persistently falls within the target range. But China and Japan are exceptions, with both countries' output below potential levels and inflation expectations still moderate. Unless financial market pressure intensifies and financial stability is threatened, central banks of various countries should separate their monetary policy goals from financial stability goals, use existing tools to mitigate financial stability risks, and continue to tighten policies to cope with inflationary pressures. In addition, due to high public debt and increased interest costs, countries need to continue implementing fiscal consolidation, which will also help combat inflation. At the same time, the Asia Pacific region should prioritize carrying out structural reforms to enhance economic growth potential by encouraging innovation, promoting digitization, and accelerating green energy transformation. (Economic Daily reporter Liu Chang)