SINGAPORE – The International Monetary Fund has lowered its forecasts for several Southeast Asian economies, although it has turned more optimistic about the global economy and Asia-Pacific.
The IMF expects the five largest developing economies in Southeast Asia to grow collectively by 4.9% in 2021, down from its previous projection of 5.2%. These five economies are Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
Jonathan Ostry, the IMF deputy director of the Asia-Pacific department, said on Wednesday that an increase in Covid cases and the renewal of blockades diminish the economic prospects of some Southeast Asian countries.
“We are concerned about both the prospects for tourism, when these markets will reopen, and the additional blockages and ongoing measures that the unexpected change in the disease is creating in some of these countries,” Ostry told Squawk Box Asia in CNBC.
Indonesia, Malaysia and the Philippines are among those that have had to tighten some restrictions this year, following an increase in Covid cases. Vaccination in these countries is also progressing at a slower pace than many nations globally.
Statistics compiled by Our World in Data showed that 3.76% of people in Indonesia received at least one dose of Covid vaccine – lower than the overall level of 5.76%. The share stood at 1.8% and 0.96% for Malaysia and the Philippines, respectively, according to the data.
A “great concern” in India
The decline in growth forecasts for some Southeast Asian economies came as the IMF improved its growth forecast for the wider Asia-Pacific region from 7.3% to 7.6% this year. The fund also raised its growth projection in 2021 for the global economy from 5.5% to 6%.
Ostry said advanced economies such as Japan, South Korea, Australia and New Zealand have lagged behind the brighter prospects for the Asia-Pacific this year.
“Asia is a very open, outward-looking region, and there will be positive side effects from the better image of the United States and the stronger fiscal stimulus from the United States, especially for advanced Asian economies,” he said.
Among the region’s developing economies, the IMF has updated its growth projections for China and India.
China now expects growth of 8.4% this year, higher than the fund’s previous forecast of 8.1%; while India is expected to expand by 12.5%, faster than the 11.5% previously expected by the IMF.
But Ostry said there was still “great concern” about the growing number of Covid cases in India. The South Asian country this week overtook Brazil as the second worst infected nation, behind only the US
“In the particular case of India, it was a conservative projection – I think – of 12.5%, others were higher than these and we are still okay with this number, although there are certainly downside risks,” Ostry said.
He pointed out that the growth of infections in India has so far been limited to certain states and areas – and is not yet a national problem.