New Delhi: As supply-chain disruptions fade and the service sector expands, India and China will account for more than half of the increase in the global economy in 2023, the International Monetary Fund (IMF) announced on Monday.
The IMF predicted in a blog post that the Asia-Pacific region's economy will grow by 4.7% in 2023 compared to 3.8% in 2018, making it a bright light amid a weakening global economy.
The IMF predicted that the rest of Asia will provide an additional quarter of global growth, even if China and India are likely to account for more than half of it.
Strong commercial and tourist ties between China and the United States have allowed for its reopening, which has facilitated "a faster-than-expected return in activity," the agency claimed. The IMF said that the economies of Cambodia, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam are all returning to their robust pre-pandemic growth.
For every percentage point faster growth in China, according to the IMF's methodology, output in the rest of Asia increases by around 0.3%, it said. Notwithstanding these advances, the outlook for Asia's advanced countries is more ambiguous.
The global financial agency predicted that this year, inflation in Asia will start to decline.
Although core inflation is proving to be more persistent and hasn't fully eased, there are promising signals that headline inflation peaked during the second half of last year, the IMF stated in its blog post. In spite of softening financial and commodity headwinds, we expect inflation to return to central bank objectives sometime in 2019.
While core inflation is still over goal even if inflation is heading in the right direction, the IMF issued a warning that central banks must stay vigilant.
6.25 percent was the three-month high for inflation in India, mostly due to rising prices for goods and commodities. After that, on February 8, the Reserve Bank of India raised its repo rate by 25 basis points to 6.25 percent.
The IMF also noted that central banks could need to raise interest rates further since January's inflation figures led experts to forecast that the RBI will raise rates again in April.
The agency stated that if core inflation does not clearly indicate a return to goal, central banks "may need to boost rates further."
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