The International Monetary Fund (IMF) Headquarters is seen in Washington D.C., the United States, April 13, 2020. (Xinhua/Liu Jie)
Geo-economic fragmentation is "a clear negative" for the Asia-Pacific region "with a lot of very open economies that have deep trade linkages," an International Monetary Fund (IMF) official has said.
by Xiong Maoling, Hu Yousong
WASHINGTON, Oct. 15 (Xinhua) -- Geo-economic fragmentation is "a clear negative" for the Asia-Pacific region "with a lot of very open economies that have deep trade linkages," an International Monetary Fund (IMF) official has said.
"The basic reason is geo-economic fragmentation leads to less efficiency in production chains. So we remain very concerned about (it)," Thomas Helbling, deputy director of the IMF's Asia and Pacific Department, told Xinhua in a recent virtual interview.
The impact can be large in terms of gross domestic product (GDP), Helbling noted, adding that a GDP loss of 1 percent in five years, for example, would roughly translate into lower growth of about 0.2 percentage points a year.
The IMF official called for restoring and maintaining trust in multilateral institutions and processes, and strengthening the World Trade Organization (WTO).
Noting that economic scarring is especially a concern for emerging markets and developing economies in Asia and elsewhere, Helbling said the IMF encourages policymakers to adopt macroeconomic policies to maintain macroeconomic stability, reduce inflation and increase fiscal buffers.
In China, the general macroeconomic policy support has been appropriate, said the IMF official.
The government this year has avoided a fiscal cliff by adopting some support measures from the COVID policy period, and monetary policy has been eased, which has helped the real estate mortgage financing and reduce the household debt burden and debt burdens in the economy more generally, he said.
Noting that the correction in real estate is weighing on the economy and also weighing on confidence, Helbling said that there needs to be a "more strategic approach" that lays out how this sector will adjust as it shrinks to a more sustainable level, highlighting the restructuring of unfinished construction process by developers in distress.
Helbling also suggested that policymakers lay out the path for restructuring of local government finance and the role that price adjustment will play in the process.
To cope with population ageing, Helbling said there are ways to delink the demographics from the labor force in the sense "you can delay the decline in the population hitting the labor force," with measures such as raising the retirement age in some sectors.
Female labor force participation is important and there are ways to reduce the tensions or possible trade-offs between employment and having children, including childcare, he said.
The IMF official also suggested moving fiscal support away from investment and reorienting towards spending that helps consumption and the people, and could also deal with demographics and some of the related pressures.
In its latest projection, the IMF expects growth in China to reach 5 percent this year, and growth in the Asia-Pacific to accelerate from 3.9 percent in 2022 to 4.6 percent this year.
"Asia-Pacific is the most dynamic region in global economy ... the region has carried over two thirds of global growth this year. And this will continue," Helbling said.
"We expect China and the region to remain the most dynamic region, to contribute importantly to global growth," said the IMF official.■
