Economic output in the Asia Pacific region may remain below pre-covid trends in the medium term this year. It also includes China’s economy, which is leading to economic recovery around the world. This estimate has been made in the Regional Economic Outlook report of the International Monetary Fund (IMF).
Fear of economic crisis in the Asia Pacific region
According to the IMF, there is a possibility of an economic crisis in the region. Because, during the epidemic, the labor market has been badly affected and its participation has also decreased. The report states that the outlook for Asian countries may remain down. It also includes China and South Korea, the countries leading the global recovery. However, the prevalence of coronavirus in these countries may make the road to recovery difficult.
1.9% increase in China estimated
According to the report, the rate of regional growth in 2020 maybe -2.2%. This is 0.6% lower than the June estimate. According to the report, India, the Philippines and Malaysia are expected to fall this year. Whereas, China is projected to grow by 1.9%. It said that the spread of epidemics, social distancing and border restrictions will affect the countries which depend on tourism.
Employment affected by the epidemic
The global financial crisis has also adversely affected employment due to the epidemic. Women and young laborers have been the most affected in this. The IMF said that local governments and central banks can help on this, in which debt monetization may prove to be a better option.
Data monetization is a better option
According to the institution, in some cases where inflation is low, debt monetization may prove to be correct. Provided that it is well disseminated, limited in size and fixed time, and implemented under a clear operation framework, which preserves the independence of the Central Bank and does not impede monetary policy.
US-China tension will affect recovery
The crisis in the region is currently increasing due to the direct purchase of sovereign debt by some central banks in Asia such as Bank Indonesia. While other Asian countries have said to buy the option of sovereign debt as per requirement. However, the IMF has cautioned that the ongoing geopolitical tension between China and the US could lead to a break on economic recovery. According to the IMF, China’s recovery could boost regional trade, weak global growth, tensions surrounding closed borders, technology and security.