The International Monetary Fund (IMF) has warned that Asian economies need to be wary of ‘spillover’ risks due to the implementation of monetary policy tightening faster than expected by major central banks.
In economic terms, the ‘spillover effect’ is the impact that unrelated events in one country can have on the economy of another country.
These risks are seen to have a greater impact on the most vulnerable economies, according to IMF Deputy Managing Director Kenji Okamura.
He also said that Asian economies faced the choice of either supporting growth with more stimulus or reducing it to stabilize debt and inflation.
The easing policy of the Central Bank of Japan (BOJ) which the IMF has deemed effective, is in stark contrast to the global shift towards monetary tightening such as the United States, the UK and Australia which have raised interest rates.
The widening gap between Japanese and American interest rates has been a major factor in the yen’s depreciation to a recent 20-year low.
In addition, Okamura also said that the Covid-19 pandemic, the war in Ukraine and the more ‘tight’ global financial situation will make this year challenging.
He added that Russian aggression and sanctions had affected Asia through higher commodity prices and slower growth in Europe.
