The International Monetary Fund IMF warns policymakers to liberalize the markets; the current trade tensions could strangle Asian economic growth by 0.9 percent in the coming years.
The international financial institution has also warned in their half-yearly report that Asian Pacific region and emerging economies could see a strong setback if Federal Reserve and other major central banks tighten their monetary policy more aggressively than expected.
The turmoil has already started reflecting on some emerging economies due to decreased capital flows and increased cost of borrowing, it could worsen the situation of Asian region specifically.
The IMF director for Asia Pacific Region, Changyong Rhee said “there would be no winners in Asia from the global trade frictions as other countries are not able to compensate for supply chain disruptions in China and the U.S. as they are the top two world economies.
The director said that trade tensions could sustain for some time now and financial markets are expected to tighten. The policymakers should be vigilant and use their arsenals when it’s really needed, he added while briefing on the report. The IMF has projected the Asian economic growth which is expected to expand by 5.6 percent this year; however, it is projected to plunge by 0.2 percent at 5.4 percent for the next year.
This is all because of China, United States trade war and strangled financial market and monetary in some economies, the IMF said.
The ongoing escalating and tariff wars could cause GDP losses for both 1.6 percent in China and nearly 1 percent in the United States. Other economies in Asia, especially those who supply goods and services to China through global value chains would also be impacted, when all these factors are combined, we can decipher the Asian economic growth going down by 0.9 percent in the next couple of years, the IMF said.