The International Monetary Fund (IMF) reported on Friday that risks to the Asian economy have intensified, citing rising trade tensions, challenges in China’s property sector, and the potential for further market turbulence.
The IMF noted that continued downward pressure on prices from China could “trigger trade tensions” by negatively impacting sectors in neighboring countries with similar export profiles. It urged Beijing to take steps toward a more demand-led recovery.
“A prolonged and sharper-than-expected slowdown in China would harm both the region and the global economy,” the IMF stated in its Regional Economic Outlook for Asia report. It highlighted that China’s policy response is crucial in this context and recommended measures to facilitate adjustments in the property sector and strengthen private consumption.
In its latest forecast, the IMF projects that Asia’s economy will grow by 4.6% in 2024 and 4.4% in 2025, bolstered by anticipated global monetary easing that may boost private demand next year.
These projections mark an upward revision of 0.1 percentage points from the IMF’s April forecast but remain below the 5.0% growth recorded in 2023. The IMF emphasized that risks are “tilted to the downside,” as past monetary tightening and geopolitical tensions could dampen global demand, raise trade costs, and destabilize markets.
“An escalation of retaliatory tariffs among major trading partners poses a significant risk,” the IMF warned, adding that this would heighten trade fragmentation and impede regional growth.
While low growth, high debt, and escalating conflicts were central topics at last week’s International Monetary Fund and World Bank annual meetings, financial leaders also expressed concerns about the potential impact of a Donald Trump return to office in the upcoming U.S. presidential election.
Analysts note that Trump has pledged to impose a 10% tariff on imports from all countries and a 60% tariff on Chinese imports, which could disrupt global supply chains.
“Tariffs, non-tariff barriers, and domestic content requirements are not effective solutions as they distort trade and investment flows and undermine the multilateral trading system,” remarked Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, at a press conference on Friday. “Ultimately, such measures would lead to higher costs for consumers and investors,” he added.
The IMF also warned that recent market volatility could be a precursor to further disruptions as markets respond to anticipated U.S. Federal Reserve rate cuts and gradual hikes by the Bank of Japan.
“Sudden shifts in these policy expectations could prompt sharp adjustments in exchange rates, with spillovers into other financial segments,” the report noted, adding that “while volatility alone is not inherently harmful, it can weaken consumer confidence and deter investment.”
For China specifically, the IMF forecasts a 4.8% growth rate in 2024, a 0.2-point increase from its April prediction but still below last year’s 5.2% growth. The IMF expects China’s growth to decelerate further to 4.5% in 2025, compared to the country’s target of around 5.0% for 2024.
