IMF slightly downgrades outlook for ASEAN states

ASEAN’s economic growth is expected to reach 4.2 per cent this year and 4.6 per cent in 2024, a downward adjustment of 0.4 and 0.3 percentage points respectively.

May Kunmakara

May Kunmakara

The Phnom Penh Post


October 23, 2023

PHNOM PENH – The International Monetary Fund (IMF) has revised its economic growth projections for ASEAN nations, including Cambodia, in light of the sluggish global and regional economy, with China’s slowdown exerting a significant influence.

According to the IMF’s latest report, ASEAN’s economic growth is expected to reach 4.2 per cent this year and 4.6 per cent in 2024.

This represents a downward adjustment of 0.4 and 0.3 percentage points for 2023 and 2024, respectively, compared to April’s outlook.

Cambodia’s economic growth this year has been revised from IMF’s April number of 5.8 per cent to 5.6 per cent, with the previous 2024 forecast of 6.2 per cent also pushed slightly lower to 6.1 per cent.

These findings are part of the IMF’s Regional Economic Outlook for Asia-Pacific, released on October 18.

IMF’s October projections are slightly more optimistic than those of the World Bank, which projected Cambodia’s economy to grow at 5.5 per cent this year and to rise to 6.1 per cent in 2024, according to its October 2 report.

IMF’s positive outlook is underpinned by anticipated improvements in goods exports, diversification efforts and an increase in foreign direct investment (FDI), stimulated by the newly enacted Law on Investment.

Shanaka Peiris, division chief of regional studies at the IMF’s Asia and Pacific Department (APD), noted during an online press

conference on the Regional Economic Outlook for Asia and Pacific that the revised numbers for 2023-24

are down only slightly from the April forecast, by 0.2 and 0.1 percentage points, respectively

He attributed this revision to weakened external demand, emphasising Cambodia’s significant exposure to the US and European markets.

“We have seen integration in Cambodia with trading partners increase, reducing some of the reliance on the US and EU, which is currently quite high,” he stated.

He further explained that the diversification of the Cambodian economy, coupled with commitments under the Regional Comprehensive Economic Partnership (RCEP), will have medium to long-term impacts.

These agreements are expected to yield benefits over time, fostering an attractive business environment for investment and FDI across various sectors.

Krishna Srinivasan, director of the IMF’s APD, stated during an October 13 press conference that not only weaker growth outcomes but also diminishing external demand and subdued domestic consumption were factors contributing to the downgrade.

“Despite ongoing pressures in China’s property sector, China’s manufacturing Purchasing Managers’ Index (PMI) rose in September, while year-on-year growth in retail sales improved, both of which are encouraging. However, given the volatility of monthly data, caution in interpreting short-term fluctuations is advisable,” he said.

He stated that headline inflation has receded from post-pandemic peaks due to declining global commodity prices and the impact of monetary policy measures.

Nevertheless, he pointed out that core inflation remains stubborn in a few advanced Asian economies, attributed to tight labour markets and positive output gaps.

“Central banks should stay the course with policies to ensure stable inflation and anchored expectations. Given the accommodating financial conditions in Asia’s emerging markets, there is no immediate necessity to ease monetary policy,” he stated.

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