IMF downgrades Malaysia, fellow Asean-5 peers’ 2021 economic outlook, maintains 6pc global growth forecast

KUALA LUMPUR, July 28 — The International Monetary Fund (IMF) has revised downwards the 2021 economic outlook for Asean-5 countries by 0.6 per cent to 4.3 per cent, as the recent Covid-19 infection waves are causing a drag on activity.

The Asean-5 countries are Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.

In its latest World Economic Outlook (WEO) report released on Tuesday, the IMF, however, revised upwards the Asean-5 countries’ economic outlook for 2022 by 0.2 per cent to 6.3 per cent.

For the overall emerging market and developing economies, it said the forecast for the group was revised downwards by 0.4 per cent to 6.3 per cent in 2021, largely because of growth markdowns for emerging Asian economies.

“Growth prospects in India have been downgraded following the severe second Covid-19 wave during March–May period, and expected slow recovery in confidence from that setback. 

“Similar dynamics are at work in the Asean-5 group, where recent infection waves are causing a drag on activity,” it said.

The IMF pointed out that risks around the global baseline are to the downside, as slower-than-anticipated vaccine rollout would allow the virus to mutate further. 

It also noted that financial conditions could tighten rapidly, for instance, from a reassessment of the monetary policy outlook in advanced economies if inflation expectations increase more rapidly than anticipated. 

“A double hit to emerging market and developing economies from worsening pandemic dynamics and tighter external financial conditions would severely set back their recovery and drag global growth below this outlook’s baseline,” it said.

The IMF projected that the 2021 fiscal deficit for emerging market economies to stand at 7.1 per cent of the gross domestic product (GDP), 0.5 per cent lower than that forecast in the April 2021 WEO report.

Overall, the IMF has maintained its six per cent global economic growth forecast for 2021 and upgraded its 2022 growth projection by 0.5 per cent to 4.9 per cent.

“Although the 2021 forecast is unchanged from April, there are offsetting revisions across advanced economies and emerging market and developing economies reflecting differences in pandemic developments and policy shifts. 

“The 0.5 per cent upward revision for 2022 largely reflects anticipated additional fiscal support in the United States, with associated spillovers to the global economy,” it said. — Bernama