IMF upgrades China’s 2023, 2024 GDP growth forecasts
China’s economy is set to grow 5.4 percent this year, having made a “strong” post-COVID recovery, the International Monetary Fund said on Tuesday, making an upward revision to its earlier forecast of 5 percent growth, while expecting slower growth next year.
The IMF said continued weakness in the property sector and subdued external demand could restrict gross domestic product growth to 4.6 percent in 2024, which was still better than the 4.2 percent forecast contained in its World Economic Outlook (WEO), published in October.
The Upward revision followed a decision by China to approve a 1 trillion yuan ($137 billion) sovereign bond issue and allow local governments to frontload part of their 2024 bond quotas, in a move to support the economy.
“We have revised up growth by 0.4 percentage points in both years relative to our October WEO projections, reflecting stronger than expected growth in the third quarter and the new policy support that was recently announced,” IMF’s First Deputy Managing Director Gita Gopinath said in Beijing.
Over the medium term, growth is projected to gradually slow to about 3.5 percent by 2028 amid headwinds from weak productivity and population aging, Gopinath told a news conference to mark the release of the fund’s “Article IV” review of China’s economic policies.
India must avoid squandering its economic potential
The Indian economy is doing exceptionally well, with many reforms undertaken in past years finally paying off and paving the way for solid growth. Still, there are several blemishes on this growth and the government could yet squander a favourable constellation of domestic factors and geopolitical realignments.
The Good news is compelling. India is likely to register the highest growth rate among major economies this year, and some prognosticators give its economy short odds of one day rivalling America’s in size. The nation boasts political stability, a young and growing labour force and a rising middle class, all of which have made it the darling of foreign equity investors.
It is a landing spot for manufacturers looking for alternatives to China as supply chain bases, and prime minister Narendra Modi’s government has adroitly staked out the country’s independence in pursuing its own economic interests.
Bangladesh economy facing headwinds
The International Monetary Fund (IMF) in its latest update has said the world economy is limping. This assessment is the aggregate of economic performances of all countries — developing, developed and emerging. Bangladesh as a developing country, recently elevated to lower middle -income category, cannot be an exception to this global trend. Even though incipiently fragmented, we are still integrated into the globalised economy significantly enough to expose us to exogenous shocks. Sudden appearance of Black Swans like the Covid pandemic has made the vulnerability worse. With hindsight one can say that some policies in the macroeconomic domain were fraught, but that will be disengenuous. Policymakers did not have crystal ball before them while making decisions. What is to be scrutinised is the timeliness and adequacy of measures taken to keep the economy on an even keel in the face of turbulence.
Indonesia economy posts slowest growth
Indonesia’s economy logged solid growth in the third quarter, although it slowed more than expected to its weakest in two years as exports shrank and household spending softened.
Gross domestic product grew 4.94 percent annually in the July-September quarter, below the 5.17 percent growth logged in the second quarter, and short of the 5.05 percent predicted by economists.
Economists widely expect Southeast Asia’s largest economy to cool this year due to a slew of domestic interest rate hikes, falling commodity prices and weakening global growth.
A Surprise rate hike from Bank Indonesia last month, aimed at defending the falling rupiah currency, has taken total rate increases since last year to 250 basis points.
“While a sub-5 percent rate is still quite good, this serves as a warning for our monetary authority to not be too aggressive with rate hikes,” said Maybank Indonesia economist Myrdal Gunarto, who expects one more rate hike of 25 bps.
Japan compiles $113 billion package
Japan’s government on Thursday compiled a package of measures to cushion the economic blow from inflation that will involve spending of more than 17 trillion yen ($113 billion), a move that could worsen the country’s already tattered finances.
To Fund part of the spending, the government will compile a supplementary budget for the current fiscal year of 13.1 trillion yen, according to the plan approved by the cabinet.
Including spending by local governments and state-backed loans, the size of the package will total 21.8 trillion yen.
“Japan’s economy is seeing a big opportunity open up to shift to a new stage for the first time in three decades,” as it exits from a deflationary spiral, Kishida told a meeting of government and ruling party executives on Thursday.
Malaysia holds key interest rate at 3.0pc
Malaysia’s central bank on Thursday kept its benchmark interest rate unchanged at 3.0 percent despite a falling local currency that is putting inflationary pressure on the economy.
“At the current [rate] level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects,” the Bank Negara Malaysia said in a monetary policy statement.
The Ringgit fell past 4.7 against the dollar to a 25-year low in October, the weakest performer among major Asian currencies this year.
Moreover, central banks in Southeast Asia recently resumed rate hikes to combat weak currencies and inflation, drawing attention to the Malaysian central bank’s decision. The Bank Indonesia on Oct. 19 raised its policy rate for the first time since January, from 5.75 percent to 6.0 percent, while the Philippines’ Bangko Sentral ng Pilipinas raised its benchmark rate by 25 basis points (0.25 percent) to 6.5 percent in an emergency meeting on Oct. 26.
Nepal investment in green, resilient, and inclusive development
The Government of Nepal and 16 development partners agreed to consolidate and scale up financing and technical assistance to support Nepal to implement a set of high-priority investments and policies in line with Nepal’s Green, Resilient, and Inclusive Development (GRID).
A Joint communique to operationalize Nepal’s GRID Strategic Action Plan was endorsed at a high-level event organized by the Ministry of Finance with support from the World Bank and other development partners.
At the event, the government, development partners, civil society organizations, private sector stakeholders, and think tanks also renewed their commitments to work across institutional and sectoral boundaries to continue to finance and implement Nepal’s GRID priorities.
“In Nepal, we have already internalized the GRID approach to build a greener, more resilient, and more inclusive economy that can withstand shocks, protect our environment, and uplift the lives of our people,” said Honorable Finance Minister, Dr. Prakash Sharan Mahat. “Nepal’s new GRID Strategic Action Plan can be a policy vehicle that accelerates growth and job creation, strengthens livelihoods, and boosts the prosperity of Nepali people sustainably.”
Singapore expects economy to improve in second half of 2024
Singapore expects muted prospects for its economy in the short-term amid global uncertainty, but the second half of 2024 should bring gradual improvement, its central bank said on Monday.
In its semi-annual macroeconomic review, the Monetary Authority of Singapore (MAS) said gross domestic product (GDP) growth, which veered on the edge of a technical recession in the middle of the year, should improve gradually next year while core inflation is expected to ease by December.
“The third quarter of this year likely marked the turning point in the slowdown,” it said.
GDP growth was at 0.7 percent year-on-year in the third quarter of this year, according to advance estimates. The Asian financial hub narrowly avoided a technical recession, with the economy expanding 0.1 percent quarter-on-quarter in April to June following a 0.4 percent contraction in the first quarter of 2023.
“In the absence of renewed shocks or setbacks in the global economy, the Singapore economy should benefit as the global tech industry gradually emerges from its trough and global interest rates level off over 2024.”
Meanwhile, MAS expects inflation to be on a broad moderating trend and slow to an average of 2.5–3.5 percent for 2024 as a whole.
Can Vietnam become the next Asian tiger?
Amid the COVID-19 pandemic and rising US–China trade tensions, Vietnam leapfrogged South Korea to become the United States’ sixth largest trade partner by import value in 2022. This jump represents an important pivot in Vietnam’s economy — Vietnam’s biggest export to the United States is no longer textiles and garments, but high-tech products.
By the end of 2023, many flagship Apple products will have been assembled in Vietnam. Rather than competing against China’s ‘world factory’ tag, Vietnam has branded itself as an additional manufacturing destination to China within the global supply chain ecosystem. In so doing, Vietnam has subsumed some of China’s tech export market share and has been declared the biggest beneficiary of the US–China economic decoupling.
Vietnam has provided a much needed ‘neutral’ environment for foreign fintech firms to de-risk and reroute their exposure from the US–China great power rivalry — including Apple’s shift of production away from China, US-based Amkor Technology’s investment of $1.6 billion investment in a semi-conductor factory. Vietnam is also welcoming back Huawei after initially deferring to US efforts to ban the company.
Vietnam has the potential to become the fourth largest exporter of high-tech goods behind China, Taiwan and Germany. Though Vietnam currently holds seventh position, its growth has no rival — high-tech goods as a share of Vietnamese exports hit 42 percent in 2020, up from 13 percent in 2010.
Philippine inflation slows
The Philippines’ inflation rate slowed sharply in October, as harvests boosted the supply of rice and vegetables in the market and took the steam out of food costs.
Consumer prices rose 4.9 percent on-year last month, the Philippine Statistics Authority said, well down from September’s 6.1 percent.
The Biggest driver of the rise was food, which was up 7.1 percent, but that was almost three percentage points down from the month before, with rice and vegetables slowing the quickest.
“Rice inflation slowed down following the onset of peak harvest and import arrivals,” Economic Planning Secretary Arsenio Balisacan said in a statement.
“The Stable supply of vegetables as harvest season comes likewise resulted in a slower inflation rate of the commodity.”
But Balisacan warned that the El Nino weather phenomenon, which was expected to bring below-normal rainfall across the country in the coming months, could be detrimental for crops.
“It is important to ensure that the most vulnerable sectors of the society are protected and provided assistance, especially while. we expect El Nino to affect local and global food production,” he said.
HSBC economist Aris Dacanay said he expected the central bank to keep rates steady at its next meeting, scheduled for November 16, “but remain hawkish in tone”.