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Asia Remains World’s Growth Driver, Though Uncertainty Remains High- Regional Economic Outlook for Asia and Pacific

Asia Remains World’s Growth Driver, Though Uncertainty Remains High

Asia continues to offer the greatest support for the global recovery this year, though headwinds from the resurgent pandemic have dimmed the outlook somewhat.

The Asia-Pacific economy will rebound from last year’s contraction with 6.5 percent growth, led by China and India, according to the latest IMF projections. That represents a downgrade of 1.1 percentage point from the last Regional Economic Outlook in April, reflecting the spread of the more contagious Delta variant amid initially low vaccination rates. Still, even this slower pace of expansion would be the fastest of all major regions. Asia’s 2022 forecast was raised to 4.9 percent, though output in emerging and developing economies may remain below pre-pandemic trends in coming years.

Uncertainty ahead: Inflation remains a concern, but Asia’s pressures are more subdued than other regions. Surging commodity prices and supply strains have been relatively contained, keeping import prices from rising significantly and passing through to consumers.

Still, risks remain. The pandemic’s path is uncertain, supply disruptions could endure, and financial markets may turn volatile as the Federal Reserve scales back support for the U.S. economy. Natural disasters also pose a growing threat to Pacific Island nations and low-income countries.

Given these challenges, the latest assessment calls for policymakers to respond accordingly. They should first address the health crisis with swift vaccination and equitable sharing of vaccines. Economic support should continue where possible until the recovery is firmly established.

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