Asia is expected to remain the world's economic growth leader, with an overall growth of around 5. 3 percent for 2014, the International Monetary Fund (IMF) said Friday.
"In our view Asia will remain the global growth leader," Anoop Singh, director of the IMF's Asia and Pacific department, told reporters Friday. Overall, "we are essentially optimistic," he said, despite what he billed a complex global economic environment.
Emerging Asia is projected to grow at around 6.3 percent and 6. 5 percent in 2013 and 2014, according to the IMF's October 2013 Asia and Pacific Economic Outlook released Friday.
Growth prospects are weaker throughout emerging Asia, as sagging demand from advanced economies and a slowdown in China slowed industrial activity throughout much of emerging Asia. Despite robust labor markets and generally supportive financial conditions, domestic demand has also softened, the report found.
Tighter external funding conditions and homegrown structural impediments in a few countries will weigh on growth in emerging Asia, but advanced economies will see stronger growth and domestic demand will remain "robust...underpinned by still rather favorable financial conditions and resilient labor markets," the report said.
Growth in China is projected to decelerate to 7.6 percent in 2013 and 7.3 percent in 2014 as structural forces move China steadily onto a lower growth plane, the report said. Still, inflation will remain in check, due to excess capacity in a number of industries and stable food prices, the report said.
Japan's growth upswing has been a bright spot in the region as the so-called Abenomics program -- a stimulus package meant to rev up the country's economic engines -- has reignited the economy and is starting to lift the country out of chronic deflation. Financial conditions have eased markedly as a result of the exchange rate depreciation and the asset price rally triggered by quantitative and qualitative monetary easing, noted the IMF.
Inflation and inflation expectations have increased, albeit remaining well below the Bank of Japan's target of 2 percent. Growth in Japan is likely to reach 3.5 percent year on year in the fourth quarter of 2013, driven by robust domestic demand and a better export picture supported by a weaker yen and recovering industrial country demand, the IMF said.
Looking forward, growth is forecast to decelerate to 1.2 percent in 2014, owing to waning reconstruction spending, and the planned consumption tax increase, with the latter temporarily raising headline inflation to 2.9 percent. A new fiscal stimulus will be announced in December and poses an upside risk to the growth forecast, the IMF said.
In India, the fallout from recent financial stress has likely contributed to greater vulnerability of corporate and bank balance sheets and a further downward revision of growth forecasts, which were already very low in historical context. This reflects persistent supply constraints and slow progress on structural reforms. Despite weak demand, however, food prices will likely keep headline inflation close to double digits, the IMF said.
In Indonesia, growth is expected to slow given tighter financing conditions and weakening investment, before some stabilization next year. In most other ASEAN (Association of Southwest Asian Nations) economies, growth should pick up somewhat. External demand will improve while domestic demand is likely to prove resilient to tighter domestic financial conditions, partly reflecting stronger public infrastructure spending, the report said.