Euro’s slowdown to impact ASEAN, warns IMF

MANILA, Philippines – The International Monetary Fund has slashed 2012 and 2013 growth forecasts for most countries, including ASEAN members, as the euro area economy is “now expected to go into a mild recession.”

In a forecast update released on Tuesday, January 24, the Washington-based lender said “financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated.”

This is a downward revision of about 0.75% against the September 2011 World Economic Outlook.

It said most major economies were, “decelerating but not collapsing” and pinned much of the blame on the debt crisis in the eurozone, where it expects GDP to shrink by 0.5% during this 2012.

Growth in emerging and developing economies is also expected to slow because of the worsening external environment and a weakening of internal demand.

Developing Asia, including Asean-5, is seen to slow to 7.3% in 2012(0.7% lower than previous projection) and 7.8% in 2012 (0.6% lower)

Asean-5, which includes the Indonesia, Malaysia, Philippines, Thailand, and Vietnam, is seen to slow to 7% in 2012 (0.5% lower than previous projections) and to 5.6%.

The IMF projects that Asean-5 slowed to 4.8% in 2011 from 6.9% in 2010.

The Philippines grew by only 3.6% in the first 9 months of 2011, brining the full year prospects lower than 2010’s phenomenal 7.1`% growth.

“Lately, the near-term outlook has noticeably deteriorated, as evidenced by worsening high- frequency indicators in the last quarter of 2011. The main reason is the escalating euro area crisis, which is interacting with financial fragilities elsewhere,” the report said.

“Specifically, concerns about banking sector losses and fiscal sustainability widened sovereign spreads for many euro area countries, which reached highs not seen since the launch of the Economic and Monetary Union,” it stressed. – Rappler.com