IMF cuts GDP growth forecast for ASEAN-5

MANILA, Philippines — The International Monetary Fund (IMF) has slashed the economic growth forecast for member countries of the Association of Southeast Asian Nations (ASEAN) as the global economy entered 2022 in a weaker position amid higher inflation and the spread of the Omicron COVID variant.

In the latest World Economic Outlook, the IMF lowered the gross domestic product (GDP) growth forecast for ASEAN-5 to 5.6 percent from the original target of 5.8 percent in the October 2021 WEO.

The ASEAN-5 is made up of Indonesia, Malaysia, Thailand, Vietnam and the Philippines.

The IMF said the region likely posted a strong rebound in 2021, with a growth of 3.1 percent after shrinking by 3.4 percent in 2020 due to the impact of the pandemic.

For 2023, the IMF expects ASEAN-5 to post a faster GDP growth of six percent.

The multilateral lender did not provide the GDP growth forecast for each country.

After slipping into recession for five straight quarters, the Philippines bounced back with a back-to-back GDP growth of 12 percent in the second quarter of 2021 and 7.1 percent in the third quarter.

The Cabinet-level Development Budget Coordination Committee (DBCC) said the Philippines’ GDP likely grew between five and 5.5 percent last year after shrinking by a record 9.6 percent in 2020.

For 2022, Philippine economic managers see a faster GDP growth of seven to nine percent.

In the latest WEO, the IMF cut the 2022 global GDP outlook to 4.4 percent from the original forecast of 4.9 percent due to rising caseloads, disrupted recovery and higher inflation.

“Global growth is expected to moderate from 5.9 in 2021 to 4.4 percent in 2022 – half a percentage point lower for 2022 than in the October WEO, largely reflecting forecast markdowns in the two largest economies,” the IMF said.

The projected 2022 GDP growth for the US was cut to four percent from the previous target of 4.6 percent, while that of China was slashed to 4.8 percent instead of 5.6 percent.

The IMF noted that countries have reimposed mobility restrictions due to the more contagious Omicron variant spreads, while rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the US and many emerging market and developing economies.

It also noted the ongoing retrenchment of China’s real estate sector and slower-than-expected recovery of private consumption which have limited growth prospects.

“The emergence of new COVID variants could prolong the pandemic and induce renewed economic disruptions. Moreover, supply chain disruptions, energy price volatility and localized wage pressures mean uncertainty around inflation and policy paths is high,” the IMF said.

This, according to the IMF, could prompt advanced economies to lift policy rates, putting pressure on capital flows, currencies and fiscal positions in emerging market and developing economies, especially with debt levels having increased significantly in the past two years.