IMF Heaves Asia's Economic Forecast and Tells Banks to Tighten Their Policies

On Tuesday (May 2), the International Monetary Fund (IMF) raised Asia's economic forecast as China's recovery supported growth, but warned of risks from persistent inflation and global market volatility caused by Western banking sector woes.

According to the IMF, the reopening of China's economy will be critical for the region, with the spillover to Asia focusing on consumption and service-sector demand rather than investment.

"Asia and the Pacific will be the most dynamic of the world's major regions in 2023, primarily driven by China's and India's buoyant outlooks," the IMF predicted in its regional economic outlook report.

"As in the rest of the world, domestic demand is expected to remain the largest growth driver across Asia in 2023."

"The costs of failing to bring inflation below target are likely to outweigh any benefits from keeping monetary conditions loose," according to the IMF.

"Inadequate short-term tightening would necessitate disproportionately more monetary tightening later to avoid high inflation becoming ingrained, making a larger contraction more likely."