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The IMF downgrades GDP forecasts for Southeast Asia in terms of Covid concerns

SINGAPORE – The International Monetary Fund downgraded its forecasts for more economies in Southeast Asia, although it became more optimistic about the global economy and Asia and the Pacific more broadly.

The IMF expects the five largest developing economies in Southeast Asia to grow by a total of 4.9% in 2021, down from the previous projection of 5.2%. These five economies are Indonesia, Malaysia, the Philippines, Thailand and Vietnam.

Jonathan Ostry, the IMF̵

7;s deputy director for the Asia-Pacific division, said on Wednesday that an increase in Covid cases and renewed lockdowns dampened the economic outlook in some Southeast Asian countries.

“We are concerned both about the prospects for tourism when these markets reopen, and the further lockdowns and continued action that the disease’s unexpected turnaround in some of these countries is creating,” Ostry told CNBC’s “Squawk Box Asia.”

Indonesia, Malaysia and the Philippines are among those who may tighten some restrictions this year following a sharp rise in Covid cases. Vaccination in these countries is also progressing at a slower pace compared to many nations globally.

Statistics compiled by Our World in Data showed that 3.76% of the population of Indonesia has received at least one dose of a Covid vaccine – lower than the global level of 5.76%. The stock was 1.8% and 0.96% for Malaysia and the Philippines, respectively.

A ‘big concern’ in India

The decline in growth forecasts for some Southeast Asian economies came as the IMF upgraded its growth forecast for the wider Asia-Pacific region from 7.3% to 7.6% this year. The fund also increased its 2021 growth projection for the global economy from 5.5% to 6%.

Ostry said advanced economies such as Japan, South Korea, Australia and New Zealand were behind the Asia-Pacific brighter outlook this year.

“Asia is a very open, outward-looking region, and there will be positive spillovers from the better US picture and the stronger US fiscal stimulus, especially for the Asian advanced economies,” he said.

Among the region’s developing economies, the IMF upgraded its growth projections for China and India.

China is now expected to grow by 8.4% this year, higher than the fund’s previous forecast of 8.1%; while India is expected to expand by 12.5%, faster than the 11.5% that the IMF previously expected.

But Ostry said there is still a “major concern” over an increase in Covid cases in India. The South Asian country this week took over Brazil as the second worst infected nation, only behind the United States

“In the particular case of India, it was a conservative – I think – projection of 12.5%, others were higher than that, and we are still okay with that number, although there are certainly disadvantages associated with risk,” Ostry said.

He pointed out that the rise in infections in India so far has been limited to certain states and territories – and is not yet a nationwide problem.

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