SINGAPORE – The International Monetary Fund lowered its forecasts for several Southeast Asian economies, although it became more optimistic about the global economy and Asia-Pacific more broadly.
The IMF expects the top five developing economies in Southeast Asia to grow collectively by 4.9% in 2021, below its previous projection of 5.2%. These five economies are Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
Jonathan Ostry, deputy director of the IMF’s Asia-Pacific department, said Wednesday that an increase in Covid cases and the renewal of closures are weakening the economic outlook for some Southeast Asian countries.
“We are concerned about both the prospects for tourism, when these markets will reopen, and the additional blockages and continued measures that the unexpected turn of the disease is creating in some of these countries,” Ostry told Squawk Box Asia CNBC.
Indonesia, Malaysia and the Philippines are some of those that had to tighten some restrictions this year after an increase in Covid cases. Vaccination in these countries is also progressing at a slower pace compared to many nations worldwide.
Statistics compiled by Our World in Data showed that 3.76% of people in Indonesia have received at least one dose of Covid vaccine, below the overall level of 5.76%. According to the data, the share stood at 1.8% and 0.96% for Malaysia and the Philippines, respectively.
A “big concern” in India
The decline in growth forecasts for some Southeast Asian economies occurred as the IMF improved its growth forecast for the wider Asia-Pacific region from 7.3% to 7, 6% for this year. The fund also increased its growth projection for 2021 for the world economy from 5.5% to 6%.
Ostry said advanced economies such as Japan, South Korea, Australia and New Zealand were behind the brighter Asia-Pacific outlook this year.
“Asia is a very open, outward-looking region, and there will be positive repercussions for the better image of the U.S. and strong U.S. fiscal stimulus, especially for advanced Asian economies,” he said.
Among the developing economies in the region, the IMF improved its growth projections for China and India.
China is now expected to grow 8.4% this year, above the fund’s previous forecast of 8.1%; while India is expected to expand 12.5%, faster than the 11.5% previously predicted by the IMF.
But Ostry said there is still “great concern” over the increase in Covid cases in India. This week, the South Asian country overtook Brazil as the second most infected nation, just behind the United States.
“In the specific case of India, it was a conservative projection (I think) of 12.5%, others were higher than that and we are still fine with that number, although there are certainly downside risks,” he said. said Ostry.
He noted that the increase in infections in India has so far been limited to certain states and areas, and that it is not yet a national problem.