China and India to drive half of 2023's global economic growth: IMF
End of zero-COVID seen supercharging Asia-Pacific region
HONG KONG -- China and India will account for more than half of this year's global growth, the International Monetary Fund predicts, underscoring the Asia-Pacific region's strength amid rising uncertainty over the U.S. economy.
The IMF forecast in April that Asia-Pacific real gross domestic product will increase 4.6% in 2023, an upgrade of 0.3 percentage point from last October's projection. It sees the global economy expanding 2.8%.
China will contribute 34.9% of the global growth, and India 15.4%, according to the IMF. These add up to 50.3%.
The Asia-Pacific region as a whole is projected to drive about 70% of global international economic growth, increasing its presence as Western growth slows. This is "a much larger share than we've seen in the past few years," said Krishna Srinivasan, director of the IMF's Asia and Pacific Department, in a news conference here Tuesday.
China will contribute the most to growth, according to the IMF. The organization in April upgraded the country's projected growth for 2023 by 0.8 point to 5.2%.
The world's second-largest economy is enjoying a recovery in consumer spending thanks to the recent end of rigid zero-COVID policies. The IMF sees consumption, rather than investment, as the big driver of Chinese growth this year.
Neighboring countries will also enjoy a spillover effect. Vietnam and Cambodia are benefiting from inflows of Chinese tourists and growing exports to China.
Each 1-point gain in China's growth translates to a 0.3-point gain in neighbors' medium- to long-term growth, according to Srinivasan.
On the other hand, China's official manufacturing purchasing managers' index fell below the boom-or-bust line of 50% in April. Srinivasan acknowledged the risks to the country's growth and recommended support for the real estate sector, which was a drag on growth last year.
The IMF in April downgraded India's 2023 growth forecast by 0.2 point to 5.9%. It cited softening internal demand, but Srinivasan said Tuesday that growth remains solid.
For 2024, the organization projects the Asian-Pacific economy to grow 4.4% -- a downgrade of 0.2 point from the previous outlook. Global demand will slow, partly on the negative impact of faltering Western economies, which will weigh on overall economic growth, according to the IMF.
Because of elevated core inflation, which excludes food and energy prices, the IMF sees countries facing the difficult task of reconciling monetary tightening with policies that promote economic growth.
Tuesday's news conference touched on China's latent risks and challenges. Property development giant China Evergrande Group was declared to be in default in 2021, roiling the country's real estate market. The sector has been on the mend, thanks to the government stepping in to prop up the industry since last year.
But small to midsize developers are still struggling, along with lower-tier cities. The IMF recommended that the Chinese government provide support to correct the unequal recovery.
China is grappling with such structural issues as an aging society and a shrinking population. Srinivasan said China could boost its potential growth rate by 1 point if it embraces such reforms as raising the retirement age.
The U.S. has been dealing with a string of failures at regional banks, such as the collapse of First Republic Bank. Although the global banking sector is experiencing rising stress, the impact has been limited in the Asian market so far, Srinivasan said.