SINGAPORE – Economic growth in Asia is likely to be 4.6 per cent in 2023, up from 3.9 per cent in 2022, despite a challenging global environment, said the International Monetary Fund (IMF) on Wednesday.

But the IMF lowered its 2023 growth projection for Singapore’s economy to 1 per cent from an earlier estimate of 1.5 per cent in April, as some Asian economies are hit harder by weaker global demand for goods exports and a slowing Chinese economy.

Singapore growth will pick up to a pace of 2.1 per cent in 2024, aided by the ongoing recovery in services and possibly a rebound in external demand for electronics, but the outlook for Asia is for further moderation, the IMF said in its Regional Economic Outlook update.

It said the growth momentum is slowing as global demand has rotated from goods to services while central banks worldwide have raised interest rates to fight inflation and, in the process, have tightened the supply of loans to businesses and households.

Meanwhile, China’s economy is losing steam after a brief pick-up in the wake of its full reopening earlier in 2023 – this will weigh on demand throughout the region.

The world’s second-largest economy will grow at 5 per cent in 2023 before decelerating to 4.2 per cent in 2024 – down from 4.4 per cent predicted earlier – due to lacklustre investment and a slump in the property sector.

“The real estate sector in China is grappling with further pressures on debt repayments, home sales and investment,” Dr Krishna Srinivasan, director of IMF’s Asia-Pacific department, said in a news briefing after the launch of the report.

The IMF did upgrade the growth outlook for the US and Japan – both major buyers of Asian goods – but believes that it will not completely offset the drag from China.

In fact, the IMF believes that China is in a structural slowdown, which will bring down its medium-term growth spread over the next five years to just 3.8 per cent on average.

Mr Srinivasan said that geopolitical fragmentation – where some advanced countries like the US are friend-shoring or re-shoring manufacturing – will also hurt growth and productivity in China and some other Asian economies and bring the region’s medium-term growth down to 3.9 per cent.

“We highlighted in April that China’s growth is slowing down over time. This could affect the growth of other countries in Asia and the world because of China’s deep integration into global value chains,” he said.

The IMF also said risks to the near-term outlook, globally and in Asia, remain tilted to the downside, even as they are more balanced than six months ago.

“A weaker-than-expected recovery in China could trigger negative spillovers to its trading partners. Abrupt financial tightening in the United States or within the region would inhibit growth, especially in highly leveraged economies and sectors,” the IMF said in the report.