Despite the fact that inflation is heading in the right direction, the IMF advised Central banks to be vigilant.
According to the International Monetary Fund (IMF), as supply chain disruptions fade and the service sector expands, India and China will account for more than half of the increase in the global economy in 2023.
The IMF predicted in a blog post that the Asia-Pacific region’s economy will grow by 4.7% in 2023 compared to 3.8% last year, making it bright spot amid weakening global economy,
The IMF predicted that the rest of the Asia will provide an additional quarter of global growth, even if China and India are likely to account for more than half of it.
Strong commercial and tourism ties with China, which has reopened, have facilitated “a faster-than-expected rebound in activity,” the agency claimed.
“Cambodia, Indonesia, Malaysia, the Phillippines, Thailand, and Vietnam are all back their robust pre-pandemic growth,” the IMF said.
For every percentage point faster growth in China, according to the IMF’s methodology, output in the rest of Asia increases by around 0.3%, it added. Despite these advances, the outlook for Asia’s advances countries is more ambiguous.
Although core inflation is proving to be more persistent and hasn’t fully eased, there are promising signals that headline inflation peaked during the second half of the last year, the IMF stated in its blog post.
“We anticipate that next year., as financial and commodity headwinds ease, inflation will return to central banks targets.
While core inflation is still above goal even if inflation is heading in the right direction, the IMF issued a warning that central banks must remain vigilant.
6.25 percent was the three-month high for inflation in India, primarily due to rising prices for goods and commodities.
following that, on February 8, the Reserve Bank of India raised its repo rate by 25 basis points to 6.25 percent.
The IMF also noted that central banks might need to raise interest rates further as January’s inflation figures led analysts to forecast that RBI will rise rates again in April.
If core inflation does not clearly indicate a return to target, central banks “may need to hike rates further,” the agency warned
