China’s zero-Covid policy can lower economic growth in neighbouring Asian countries, warns IMF

New Delhi: The economic slowdown in China due to its stringent zero-Covid policy and intermittent lockdowns could spell trouble for its Asia neighbours with whom the country shares strong financial band trade ties. The International Monetary Fund (IMF) reported the developments on Friday, putting the growth forecast for the continent (Asia) to 4 per cent this year, which is down 0.9 per cent from an earlier projection.

As per a report, while Asia’s economies were expected to expand by 4.3 per cent in 2023, Krishna Srinivasan, director of IMF’s Asia-Pacific department, warned that growth could be lower due to tighter financial conditions, inflation from the Ukraine war and a strong zero-Covid policy.

Meanwhile, threatening the region’s economic recovery story was also the potential trade fragmentation. IMF report noted that there were early signs of it, with a jump in the number of trade restrictions imposed by countries.

‘China’s economy hurt in part by its hardline zero-Covid strategy’

In a recent interview, Srinivasan opened up about the risks involved stating that China’s economy has been hurt in part by its hardline zero-Covid strategy that involved strict border controls and intermittent lockdowns.

Zero-Covid policy backfiring?

As per reports, the zero-Covid policy rapidly backfired for China, with the lackluster 0.4 per cent growth China produced in the April-to-June period year-on-year being miles away from the 5.5 per cent output Xi Jinping earmarked for 2022.

Relief soon?

However, Srinivas was optimistic there could be relief soon stating that slowly zero-Covid (measures) will be modified and they will be gradually opening up the economy and things will become more normal.

Must Read: More than Taiwan, is China eyeing to grab Russian far east?

Real estate woes

Srinivasan, however, is less sanguine about real estate crisis grappling China, with a growing number of property developers defaulting on their debt. The IMF report added that the factors have spread to other parts of the Chinese economy as well. Earlier, the organisation had earlier said it expected China’s growth to slow to 3.2 per cent this year, its smallest expansion in around four decades.

 Impact of Russia-Ukraine war

Reports suggest that the fallout from Russia’s Ukraine invasion on global food and energy costs and supply chains has the potential to get worse. The US dollar can lure capital away from Asian markets, leaving economies starved for liquidity.

Don’t Miss: Covid outbreaks surge in China as authorities double down on disruptive, repressive curbs

Global economy

Srinavasan said that with economies in the United States and Europe slowing sharply, Asia would feel the pinch of China’s muted economic growth. He added that if China slows could be significantly bad for Asia, especially for countries which have very strong trade links with China, for example Japan and South Korea.

 Government policies

Srinivasan suggested governments should adopt complementary forward-looking monetary and fiscal policies while providing targeted support to vulnerable populations.

With inputs from agencies

Read all the Latest News, Trending News, Cricket News, Bollywood News,
India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.