Asia’s economies will need to focus on fiscal stability in order to offset surging debt and to support monetary policy, the International Monetary Fund has warned.
In its latest outlook for the region, the IMF said Asia is now both the world’s largest debtor and saver and sever. all countries are at a high risk of debt distress. That means any additional spending by governments to offset the hit from food and energy shocks needs to be targeted, temporarily and budget neutral, the Washington-based lender said.
” Public and private debt. namesake already worse following the pandemic because of slower growth , rising rates, and higher debt levels , ” the IMF said. ” Large depreciations and rising interest rates could trigger financial stress in countries with high leverage among non-financial corporates and households as well as unhedged balance sheets and those facing refinancing risks. ” If interest rates continue to rise sharply, it will limit government spending options the IMF said.
The warning comes as the fund, a lender of last resort downgrades its 2022 growth forecast for the Asia – Pacific region by 0.9 percentage points to 4 %.