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IMF cuts Asia’s economic forecasts as China’s slowdown bites – Al Jazeera English

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Financial agency cites rising interest rates as risk to region’s economic growth.

The International Monetary Fund (IMF) has downgraded its economic outlook for Asia as global monetary tightening, rising inflation blamed on the war in Ukraine, and China’s sharp slowdown dampen the region’s recovery prospects.

While inflation in Asia remains subdued compared with other regions, most central banks must continue raising interest rates to ensure inflation expectations do not become de-anchored, the IMF said in its Asia-Pacific regional economic outlook report released on Friday.

“Asia’s strong economic rebound early this year is losing momentum, with a weaker-than-expected second quarter,” said Krishna Srinivasan, director of the IMF’s Asia and Pacific Department.

“Further tightening of monetary policy will be required to ensure that inflation returns to target and inflation expectations remain well anchored.”

The IMF cut Asia’s growth forecast to 4 percent this year and 4.3 percent next year, down 0.9 percent points and 0.8 points from April respectively. The slowdown follows a 6.5 percent expansion in 2021.

“As the effects of the pandemic wane, the region faces new headwinds from global financial tightening and an expected slowdown of external demand,” the report said.

Among the biggest headwinds is China’s rapid and broad-based economic slowdown blamed on strict COVID-19 lockdowns and its worsening property woes, the IMF said.

“With a growing number of property developers defaulting on their debt over the past year, the sector’s access to market financing has become increasingly challenging,” the report said.

“Risks to the banking system from the real estate sector are rising because of substantial exposure.”

The IMF expects China’s growth to slow to 3.2 percent this year, a 1.2-point downgrade from its April projection, after an 8.1 percent rise in 2021. The world’s second-largest economy is seen growing 4.4 percent next year and 4.5 percent in 2024, the IMF said.

While it expects China to gradually lift strict COVID-19 curbs next year, the IMF does not see a speedy resolution to Beijing’s real estate crisis, which it said needed to be addressed in a comprehensive way to support growth.

“One would hope that with the party congress behind us, there would be further attention being paid to policy response to these,” Srinivasan said.

“But we don’t see a quick resolution of the real estate sector (crisis) because that could take longer,” he added

As Asian emerging economies are forced to raise rates to avoid rapid capital outflows, a “judicious” use of foreign exchange intervention could help ease the burden on monetary policy in some countries, the IMF said.

“This tool could be particularly useful among Asia’s shallower foreign exchange markets” like the Philippines, or where currency mismatches on bank or corporate balance sheets heighten exchange-rate volatility risks such as in Indonesia, the IMF said.

“Foreign exchange intervention should be temporary to avoid side effects from sustained use, which may include increased risk-taking in the private sector,” it added.

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Economy

Opinion: Bond markets are signalling trouble for the American economy – The Globe and Mail

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Opinion: Bond markets are signalling trouble for the American economy  The Globe and Mail

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

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OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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Statistics Canada says levels of food insecurity rose in 2022

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OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

The Canadian Press. All rights reserved.

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