IMF: Asian economies are vulnerable to sudden global tightening and protectionist shift

According to the International Monetary Fund, surge prospects for Asian countries are still strong. However, the region appears to be quite vulnerable to sudden tightening of global financial conditions, further market adjustments as well as a shift towards protectionist policies.

In its renewal of regional economic prospects, the IMF actually predicts that Asia is going to tack on by approximately 5.6% in 2018. As for the next year, it’s expected to be about 0.1% higher than the last update in October and it’s going to make approximately two-thirds of global surge.

A moderate improvement in the short-term outlook actually reflects firm and large-scale global surge underpinned by fiscal stimuli in the United States of America.

However, in the medium term, risks tend to head south. Asia still appears to be vulnerable enough to the sudden as well as abrupt tightening of global financial conditions, while a very long period of mild conditions might add more leverage and bring financial vulnerability.

The benefits of globalization are distributed unevenly, and, as was emphasized by recent tariff measures and announcements, the move to a policy oriented to the domestic market happens to be another risk, which could potentially disrupt international trade along with financial markets, as the IMF pointed out.

As for other risks, the International Monetary Fund drew attention to geopolitical tensions, cyber attacks, not to mention climate change. In the long term, the demography of aging can become a considerable brake on the economy, while digitalization is generally anticipated to become a source of uncertainty.

As follows from this, the vast majority of countries should strive to strengthen political buffers. It’s because narrowing the gap in output means that they don’t require further budgetary support, as the Fund stressed.