SINGAPORE, May 6, 2009 (AFP) - The International Monetary Fund (IMF) on Wednesday sharply slashed its growth outlook for Asia, predicting a "long and severe recession" for the region's wealthier but export-reliant economies.
The US-based institution said it now expected growth in Asia, including Japan, would slow to 1.3 percent this year after an initial forecast, made in the last quarter of 2008, of 2.7 percent growth.
"The spillovers from the global crisis have impacted Asia with unexpected speed and force," the IMF said in its regional economic outlook.
"Prospects for an imminent rebound of economic activity are weak," it said, underlining that the region is still heavily dependent on exports at a time when demand has weakened because of the global downturn.
It said it now expected 4.3 percent growth in 2010, down from an initial forecast of 4.5 percent.
For emerging nations in Asia, which excludes Japan, the IMF lowered its growth forecast to 3.3 percent from 4.4 percent. It put 2010 growth at 5.4 percent, down from an initial 6.0 percent.
The region's wealthier economies "are expected to experience a long and severe recession" because of their heavy reliance on high-tech exports and extensive exposure to the global financial system, the IMF said.
Joshua Felman, an IMF assistant director, said Asia's merchandise exports fell at an annualised rate of 70 percent between September 2008 and February this year, substantially worse than during the 1997-98 Asian financial crisis.
"Why has the impact on Asia been so jarring? The answer lies in Asia's exceptional integration into the global economy," Felman said in Singapore.
"Much of the region relies on technologically sophisticated manufacturing exports... precisely those products which global demand has collapsed."
Massive stimulus measures unveiled by several Asian governments were unlikely to help the region turn around strongly, and a rebound hinges on when the global upswing begins, he said.
"Whenever exports have slumped, Asia has typically slipped into recession -- and Asia does not recover until exports have started to revive," he said.
The IMF in the report urged Asia to "rebalance" its growth model and focus more on spurring domestic demand.
The export-led model of economic growth "may not pay the same dividends as in the past" as households in advanced economies were now expected to be more careful about expenses because of the worldwide slowdown.
Asia's largest economy, Japan, is projected to shrink 6.2 percent this year, far worse than last year's contraction of 0.6 percent.
The Japanese economy is expected to return to growth in 2010 with an expansion of 0.5 percent, the IMF said.
It meanwhile said growth in China was expected to be 6.5 percent this year and 7.5 percent in 2010, and forecast 4.5 percent growth in India for 2009 and 5.6 percent the following year.
Within Southeast Asia, the IMF report said that Malaysia, the Philippines and Thailand would be affected more severely than other nations by the global slowdown due to their heavier reliance on high-tech exports.
Hong Kong and Singapore, seen as the most open economies, are likely to shrink 4.5 percent and 10 percent respectively this year, the IMF said.