China’s reopening will benefit Asia, but balancing inflation and growth will be a challenge: IMF economist

The IMF’s Pierre-Olivier Gourinchas believes China’s reopening will provide a global economic boost, most notably in Asia

But a challenge for the region will be balancing rising inflation and growth as economies from Singapore to South Korea have witnessed soaring prices

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IMF Chief Economist and Director Pierre-Olivier Gourinchas attends a press briefing for the World Economy Outlook update in Singapore on Tuesday. Photo: AFP

Published: 8:35am, 1 Feb 2023

The International Monetary Fund’s chief economist has voiced optimism that there will be positive spillover effects on Asian economies tied to the reopening of China as it exits the Covid-19 pandemic.

In an interview with This Week in Asia in Singapore on Tuesday, Pierre-Olivier Gourinchas said he was “reasonably confident” there would be a rebound in activity in China and current signs – including an uptick in domestic travel – pointed to a “quite strong reopening”.

“This reopening is certainly going to boost the global economy,” the Washington-based economist said. “Of course, it’s going to benefit more countries that are close trading partners of China that includes many Asian economies.”

2023 is going to be the year where one of the main engines of growth is going to be coming from emerging Asia

Pierre-Olivier Gourinchas, IMF chief economist

The IMF raised its global growth forecast for this year by 0.2 percentage points to 2.9 per cent in its outlook report published on Tuesday, citing China’s full reopening and strong spending in the United States. It projected China to record GDP growth of 5.2 per cent in 2023.

In line with that prediction, Asia’s emerging markets – including China and India – will be key drivers of world growth this year, with expectations that the economies of the world’s two most populous nations will make up 50 per cent of total growth.

“2023 is going to be the year where one of the main engines of growth is going to be coming from emerging Asia,” Gourinchas said. “[It] is going to be a year of lower growth for many advanced economies.”

In Asia, one crucial challenge for governments will be balancing rising inflation and growth. Gourinchas pointed out that a number of economies in the region, such as South Korea, have witnessed soaring prices even as central banks remained firm in tightening their monetary policies.