IMF warns of the specter of stagnant inflation in Asia

Anne-Marie Gulde-Wolf, the IMF’s acting regional director for Asia and the Pacific, said that while Asia’s trade and financial activities with Russia and Ukraine However, regional economies will be affected by this crisis through higher commodity prices and slower growth of European trading partners.

In addition, inflation in Asia is also starting to increase at a time of economic growth China The recession is adding pressure to regional growth.

“As a result, the region faces the prospect of stalling inflation, with growth being lower than previously expected and inflation higher,” Gulde-Wolf said during an online news conference in Washington.

The headwind to growth comes at a time when policy space for response is limited, the IMF official noted. Asian policymakers will face difficult trade-offs in response to slowing growth and rising inflation.

“It will be necessary to tighten the currency in most countries, with the speed of tightening depending on domestic inflation and external pressure,” she said.

According to expert Gulde-Wolf, the steady increase of interest rates by the US Federal Reserve is also a challenge for Asian policymakers because of the region’s huge debt in USD.

In the latest forecast published in April, the IMF Asia economic forecast growth of 4.9% this year, down 0.5% from the previous forecast in January. Inflation in Asia is now expected to hit 3.4% in 2022, 1% higher than forecast in January.

Further escalation of hostilities in Ukraine, new COVID-19 wave, Fed’s faster-than-expected trajectory of interest rate hikes and longer or more widespread lockdowns in Ukraine China are risks to Asia’s growth prospects, noted Ms. Gulde-Wolf.