IMF: sustained trade tensions and Fed tightening to hurt Asian growth

Sustained trade tensions could slash Asia's economic growth by up to 0.9 percentage point in the coming years, the International Monetary Fund (IMF) said on Friday.

Key points (Source: Reuters)

The market rout seen in emerging economies could worsen if the US Federal Reserve and other major central banks tightened monetary policy more quickly than expected.

A sudden deterioration of risk appetite, rising trade tensions, and political and policy uncertainty could also lead to tighter financial conditions.

Turmoil already seen in some emerging market economies could worsen, with negative spillovers to Asia through reduced capital flows and higher funding costs.

Sustained trade tensions could further undermine confidence, hurt financial markets, disrupt supply chains, and discourage investment and trade.

There will be winners and losers, and effecting such reforms will be difficult and will take time, but the aggregate welfare gains would be substantial.