Australia will emerge from the impact of the coronavirus pandemic in the fastest-growing region in the world.
While the International Monetary Fund has cut its economic growth forecast for the Asia and the Pacific region by 1.1 percentage points for 2021, it still expects the area to be growing by 6.5 per cent.
“Asia-Pacific remains the fastest-growing region in the world,” IMF director Changyong Rhee says.
Despite successfully containing COVID-19 in 2020, some economies in the region, including Australia, faced setbacks from an initially slow vaccination rollout, the IMF says in its regional economic outlook.
The IMF has downgraded Asia-Pacific’s economic growth for this year by more than 1 percentage point compared to its April forecast, but 2022 promises robust growth. Learn more in the upcoming regional outlook report and press conference tomorrow: https://t.co/FkepWlp2ug pic.twitter.com/x2LbSUIG4j
— IMF (@IMFNews) October 18, 2021
But as vaccination rates accelerate, the IMF expects the region to grow by 5.7 per cent, a 0.4 percentage point upgrade from a forecast made in April.
The report says Australia is benefiting from a commodities boom, confirming it expects the economy to grow by 3.5 per cent in 2021 and by 4.1 per cent in 2022, before moderating to 2.6 per cent in 2023.
However, Dr Rhee again raised the IMF’s concerns of rising inflation posing uncertainties for the global recovery through higher commodity prices, supply chain bottlenecks and rising shipping costs.
“While we expect these supply chain inflationary pressures to be transitory, they could last longer, and feed more strongly into inflation expectations,” Dr Rhee said.
The outlook also faces downside risks from COVID-19 evolving from a pandemic to an endemic and lower vaccine efficacy against new variants.
Other risks include persistent global supply disruptions, elevated financial vulnerabilities in the corporate and real estate sectors in some countries, and potential spillovers from monetary policy tightening in the US.
“Given these challenges, the impetus for policies to support a sustained and equitable recovery are critical,” Dr Rhee said.
Australia’s No.1 trading partner, China, is forecast to grow by eight per cent in 2021, down from a previous forecast of 8.4 per cent, reflecting the spread of the Delta variant and significant fiscal policy tightening.