SINGAPORE – The International Monetary Fund has downgraded its forecasts for various Southeast Asian economies, even though it has become more optimistic about the world economy and the Asia-Pacific.
The IMF expects the five largest developing economies in Southeast Asia to grow by a combined 4.9% in 2021, compared to the previous projection of 5.2%. The five economies are Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
Jonathan Ostry, deputy director of the IMF of the Asia-Pacific Department, said Wednesday that an increase in Covid affairs and renewed closures are dampening the economic prospects of some countries in Southeast Asia.
“We are concerned about the outlook for tourism, when the markets will reopen, and the additional closures and ongoing measures that will create the disease’s unexpected turnaround in some of the countries,” Ostry told CNBC’s “Squawk Box Asia.”
Indonesia, Malaysia and the Philippines are among those who had to tighten restrictions this year following an increase in Covid cases. Vaccination in those countries is also progressing more slowly compared to many countries worldwide.
Statistics compiled by Our World in Data showed that 3.76% of the people in Indonesia received at least one dose of 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 ‘major concern’ in India
The downgrade of growth forecasts for some Southeast Asian economies occurred when the IMF improved 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 world economy from 5.5% to 6%.
Ostry said advanced economies such as Japan, South Korea, Australia and New Zealand are behind the better prospects of the Asia-Pacific this year.
“Asia is a very open, outward-looking region and there will be positive spreads about the better US picture and the stronger US fiscal stimulus, especially for the advanced economies in Asia,” he said.
Among the developing economies in the region, the IMF has improved its growth projections for China and India.
China is expected to grow by 8.4% this year, higher than the fund’s forecast of 8.1%; while India is expected to expand by 12.5%, faster than the 11.5% the IMF previously expected.
But Ostry said there was still a “major concern” about an increase in Covid cases in India. The country in South Asia surpassed Brazil this week as the second worst infected country, just behind the US
“In the specific case of India, it was a conservative – I think – projection at 12.5%, others were higher than that and we are still okay with the number, although there is a downside risk,” Ostry said. said.
He pointed out that the increase in infections in India so far has been limited to certain states and territories – and this is not yet a nationwide problem.