SINGAPORE – The International Monetary Fund lowered its forecasts for several Southeast Asian economies, even as it became more optimistic about the global economy and the broader Asia-Pacific.
The IMF expects the five largest emerging economies in Southeast Asia to collectively grow by 4.9% in 2021, down from the previous forecast of 5.2%. Those five economies are Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
Jonathan Ostry, the IMF’s deputy director of the Asia and Pacific division, said Wednesday that an increase in Covid cases and renewed lockdowns are dampening the economic outlook of some Southeast Asian countries.
“We are both concerned about the outlook for tourism when those markets reopen, and the additional blockages and ongoing measures that the unexpected turn of the disease will bring in some of those countries,” Ostry told CNBC’s “Squawk Box. Asia. “
Indonesia, Malaysia and the Philippines are among those who had to tighten up some restrictions this year after an increase in Covid cases. Vaccination in those countries is also slower than in many countries worldwide.
Statistics compiled by Our World in Data showed that 3.76% of people in Indonesia have received at least one dose of a Covid vaccine – lower than the global level of 5.76%. According to the data, the share was 1.8% and 0.96% for Malaysia and the Philippines respectively.
A ‘big concern’ in India
The lowering of growth expectations for some Southeast Asian economies came as the IMF updated its growth forecast for the wider Asia-Pacific region from 7.3% to 7.6% for this year. The fund also increased its 2021 growth projection for the global economy from 5.5% to 6%.
Ostry said advanced economies such as Japan, South Korea, Australia and New Zealand were behind Asia-Pacific’s brighter outlook this year.
“Asia is a very open, outward-looking region and there will be positive spillovers from the better image of the US and stronger fiscal stimulus from the US, especially for the advanced Asian economies,” he said.
Of the developing economies in the region, the IMF has revised its growth forecasts for China and India.
China is now expected to grow 8.4% this year, ahead of the fund’s earlier forecast of 8.1%; while India is expected to grow by 12.5%, faster than the 11.5% the IMF had previously expected.
But Ostry said there is still “major concern” about an increase in Covid cases in India. The South Asian country has overtaken Brazil this week as the second most severely infected nation, after only the US.
“In the specific case of India, it was a conservative – I think – 12.5% projection, others were higher than that and we are still okay with that number, although there are certainly downside risks,” said Ostry.
He pointed out that the proliferation of infections in India has so far been limited to certain states and territories – and is not yet a nationwide problem.