Interview: Greater integration, more domestic demand conducive to Asia's durable growth -- IMF official

by Xinhua writers Xiong Maoling, Xie E, Hu Yousong

WASHINGTON, Oct. 29 (Xinhua) -- Greater regional integration and more domestic demand are conducive to sustaining strong and durable economic growth in Asia, an International Monetary Fund (IMF) official has said, urging economies in the region to make more efforts in these aspects amid trade tensions, so as to ensure that Asia continues to be a major global growth powerhouse.

Forums like the Asia-Pacific Economic Cooperation (APEC) can engender the kind of regional integration, Krishna Srinivasan, director of the IMF's Asia and Pacific Department, told Xinhua in a recent interview.

According to the IMF's latest forecast, Asia is projected to grow 4.5 percent in 2025, and 4.1 percent next year.

"There have been some very strong tailwinds which explain why Asia has grown much faster than what we thought in April," Srinivasan said. "One, because ... tariffs are lower than what we had projected in April, exports have been very strong."

"Countries across the region have provided macro policy support, both fiscal and monetary," he continued.

"And finally, financial conditions have been very supportive," he said.

Despite Asia's economic resilience, the IMF official noted that downside risks remain.

"There are still great (trade) tensions, which could reemerge. That could hurt prospects in Asia," Srinivasan said, noting that Asia is highly integrated into the global supply chain and is particularly vulnerable to trade tensions.

Financial conditions could tighten, he noted, adding that if interest rates start rising, the region could face debt-related vulnerabilities.

He encouraged Asian countries to provide targeted fiscal support to firms and people badly hurt in certain sectors and ease monetary policy to support the economy when inflation is below the target.

In the Regional Economic Outlook for Asia and Pacific released in Hong Kong on Friday, the IMF said that while Asia is at the center of the global trade-policy reset, it will remain the biggest driver of global growth, contributing about 60 percent this year and next.

To sustain strong and durable growth, the IMF said, Asia must rebalance more toward domestic demand and deepen regional integration.

"In an environment where there could be less external demand ... say, from Europe and the United States," Asia needs to rely more on domestic demand, because markets are pretty large, Srinivasan said, citing the examples of China, Indonesia and India.

Srinivasan also noted that only 30 percent of Asia's demand for final goods comes from within the region, while the rest comes from the European Union and the United States.

"So if you were to integrate more within the region, both in terms of intermediate goods and final demand, you will have a bigger market, and that will generate growth, which will help anchor the durability and the strength of growth going forward," he said.

On cooperation between China and the United States under the APEC framework, the IMF official said that these are the two largest economies in the world, accounting for the highest demand for goods, including intermediate goods, among other products.

"So when you have two large economies, and there is greater cooperation with them, you will see the whole world benefits," he said. Enditem