Transcript

Press Briefing Transcript: Asia Pacific Department, Spring Meetings 2025

April 24, 2025

Speakers:

Krishna Srinivasan, Director of the Asia and Pacific Department, IMF 

Thomas Helbling, Deputy Director, Asia and Pacific Department, IMF 

Moderator:

Randa Elnagar, Senior Communications Officer, IMF

MS. ELNAGAR: Good morning, everyone, and welcome to the press briefing on the Asia and Pacific Department. I am Randa Elnagar of the International Monetary Fund’s Communications Department. With me here today is Krishna Srinivasan, Director of the Asia and Pacific Department.  And next to Krishna is Thomas Helbling, Deputy Director of the Asia and Pacific Department.

To kick-start our briefing today, Krishna is going to give opening remarks, then we’re going to take your questions.  Krisha, please?

MR. SRINIVASAN: Good morning to participants here in Washington and a very good evening to participants online in Asia.

A quick snapshot of what happened in 2024.  Growth across Asia remained robust in the second half of 2024, with many countries closing large output gaps that had emerged during the Pandemic.  Despite solid underlying drivers in various countries, growth modestly underperformed expectations.  In China, an upside for the region, momentum exceeded expectations in late 2024 and in the first quarter of this year, supported by front-loading of exports and targeted policy support.  In Japan, growth slowed early in 2024 due to supply disruptions but recovered in the second half on the back of rebounding domestic demand.  In India, growth was driven by a pickup in exports and consumption in late 2024.  However, the overall outturn surprised slightly to the downside, reflecting a slow start to public investment post elections and temporary factors.  Private investment, however, remained weak.  In other emerging markets, the recovery generally held up with a shift from consumption to investment, in many cases.

On inflation, as you can see on the right-hand side, most Asian economies saw inflation return to or near target last year, a relatively better performance compared to other regions.  China and Thailand continue to experience persistently low inflation, while in Japan, headline inflation has been above target for nearly three years.  However, in Japan, both headline and underlying inflation are expected to converge to target in 2027. 

Now, let's move on to our outlook.  There are three reasons why Asia is particularly exposed to the recent trade policy shocks and increased trade policy uncertainty.  First, many Asian economies are very open and oriented towards trade and goods.  Second, emerging Asian economies benefited from the relatively earlier reopening from the Pandemic compared to other regions, because of which recovery of exports was also pretty good.  Third, Asian countries have continued to increase their participation in the global supply chain in recent years, with rising exposure to U.S. demand.  The share of value-added exports to the U.S. has increased both directly and indirectly through global supply chains, as shown in the chart here.  China is a notable exception where this share has declined or plateaued due to earlier round of tariffs.  The combination of greater exposure to the U.S. market and significantly high global policy uncertainty presents a vulnerability for the region. 

Besides exposure, another factor shaping the outlook is that under the U.S. tariff package announced on April 2, the Asia Pacific region would have faced the sharpest increase in effective tariff rates globally.  Although some of these measures have since been paused, trade tensions, particularly between the U.S. and China, have escalated further contributing to a significant rise in trade policy uncertainty. 

The region's growth outlook has thus weakened.  Our referenced forecast based on information till April 4 shows that growth for the region is projected to slow to around 3.9 percent in 2025 and 4 percent in 2026, down from 4.6 percent in 2024 and well below earlier expectations.  Lower external demand, a soft tech cycle, and subdued private consumption in several countries will weigh on activity. 

In the case of China, growth was downgraded to 4 percent in both this year and next year by 0.5 percent and 0.1 percentage points, respectively, due to increased tariffs and the prolonged trade policy uncertainty, which are expected to weigh on exports and investment going forward.  The fiscal expansion in the 2025 budget provides a partial offset.  In Japan, growth is projected to accelerate modestly from 0.1 percent in 2024 to 0.6 percent in 2025, but 0.5 percentage points less than anticipated. 

In the October World Economic Outlook, growth in the ASEAN is projected at 4.1 percent in 2025 compared to 4.8 percent in 2024, 0.6 percentage points less than anticipated.  For the ASEAN, we see significant markdowns for some countries like Cambodia and Vietnam.  In Korea, growth is revised downward by a full percentage point, reflecting heightened global trade tensions and domestic policy uncertainty.  The outcome for the first quarter in Korea attests to the fact that growth is slowing both because of domestic demand weakness and export coming down quite sharply.  In India, growth is projected at 6.2 percent this year and 6.3 percent next year, coming down from 6.5 percent last year.  The revisions are smaller than for other countries, as India is less exposed to the trade shock. 

Going beyond the outlook, risks to the outlook are tilted to the downside.  While a tech cycle presents mixed risks, the region is vulnerable to the uncertain trade environment and weaker-than-expected global demand.  In this environment, financial markets pose an additional downside risk as asset price volatility may further increase, disrupting capital flows and investment. 

Now, what about policies?  Policy tradeoffs are becoming sharper.  Exchange rate flexibility will be a key buffer against shocks, but in case of heightened financial market volatility, FX intervention may come into play in some circumstances.  The IMF's Integrated Policy Framework provides a good playbook.  In the regions where inflation is mostly at or below target, there is scope for monetary easing to cushion the external shocks in many countries.  While medium term fiscal consolidation remains essential, temporary and targeted fiscal support measures may become necessary to smooth the adjustment and boost demand. 

Finally, bold and durable structural reforms are needed to reinvigorate productivity and promote growth, which is essential to improve resilience over the medium term.  The Asia Pacific region faces significant structural challenges, including from increasing demographic challenges and productivity growth that has slowed and remains sluggish in recent years, as you can see in the chart on the left-hand side.  To boost the region's productivity, priority should be given to improving the efficiency in matching capital, labor, and other resources to firms, thereby facilitating structural transformation and promoting innovation.  In this context, new technologies such as AI may bring significant productivity gains and growth opportunities.  We already see some frontrunners of AI adaptation in Asia to allow sharing the benefits of AI adaptation across the broader society.  Supportive policies are essential to enhance labor market flexibility, including targeted training programs, and to a strengthening of social safety nets. 

Finally, reforms to reinvigorate domestic demand and deepen regional integration will also be critical to reduce reliance on external markets and strengthen resilience to global shocks. 

Thank you.  I look forward to your questions. 

MS. ELNAGAR: Thank you, Krishna. Let's start. Please raise your hand and identify your organization.  The lady in the second row.

QUESTIONER: Thank you for taking my question.  I have two questions for you.  First, Asia is a very open economy, as you say, and rely on the key drivers of global demand, which is the U.S and China.  With both seeing growth slowing plus the higher tariffs from the U.S., how can Asian economies continue to grow, and what are the chances of the region's economies experiencing a recession?  Plus, what would be the global tariff war?  How would the global tariff war affect Asian supply chains and the output?  So sort of a broad-based question on the impact of the tariffs on the Asian economy.  And my second question is about the impact on markets.  Uncertainty surrounding U.S. tariff policy and countermeasures taken by some countries are already causing a market turmoil that has caused broad-based declines in the dollar.  How would this affect Asian financial market flows, and are Asian policymakers ready to counter any abrupt shocks?  Thank you.

MR. SRINIVASAN: Thank you. So on the first question we have revised, you know, the growth forecast, and I showed my slide for Asia from 3.9 and 4 percent. Now, to a large extent, this reflects the fact that this is a region which has relied predominantly on exports.  Barring a few countries, it's been a region which relies a lot on exports, and a number of countries are exposed to the U.S. in particular.  Just to give you a number, if you look at the exports of Cambodia to the U.S. as a share of total exports, that's 37 percent.  Same thing goes for Vietnam; it's 30 percent.  So the exposure to the U.S. in particular is very high.  But in general, exposure to global demand is very high.  On top of that, you see that the tariff fees which are imposed on April 2, are significantly higher for Asia than other parts of the world.  So those two factors put together, exposure to external demand, and the fact that high tariff rates have slowed prospects across many parts of the region. 

Now to your question, how should Asia respond?  One thing I would say is that, seeing within the realms of trade, there's greater potential for more intraregional trade.  For example, I talked about the ASEAN, and the ASEAN intraregional trade is 21 percent.  That could be significantly increased.  Going beyond the ASEAN, there could also be more cross-regional, I mean, greater trade within the region, which could also boost your export dimension. 

But beyond that, there's a case where Asia needs to rebalance demand, need to prop up more domestic demand.  If you look at what's happened in the trend of domestic demand pre-pandemic and where we are today, significant scarring.  So you need to work on both promoting consumption and investment.  And there, I think it's important we've been very prescriptive in what China should do to boost domestic demand.  You have similarly, in our Article IV reports, we talk about how we could promote consumption and, you know, investment.  For example, the case of India, the Article IV report had a good discussion of how do you promote private investment.  So overall there's need to rebalance towards domestic demand so that the model of growth is much more balanced. 

Going to your question on supply chains, there has been some shifting of supply chains.  You know, the fact that the U.S. and China have been -- there have been trade tensions since 2016, there's been some shifting of global supply chains from there.  But beyond that, the supply chains take a long time to materially change.  But you see some signs of that happening already, and that may likely continue given where we are with the trade frictions. 

Finally, a question on market turmoil.  This is something that what we've seen in Asia is that in the context of these recent trade tensions, equity markets have really been very volatile.  Exchange rate movements have been more contained in, and corporate bond markets have been, and bond markets in general have been much more stable compared to the previous episodes.  So I think the underlying point here is heightened uncertainty, which also feeds into volatility, which leads to a tightening of financial condition.  That could be a big downside risk for Asia going forward. 

So even though we have revised our forecast down, the downside risks are still pretty significant for the region.  And that's both because of heightened trade uncertainty, a tightening of financial conditions, and what happens to external demand, I mean overall, and that's the region, the beta with respect to what happens to external demand is huge for this region. 

MS. ELNAGAR: Thank you, Krishna. I'll stay in the room. So, the lady in the middle with the white suit, please. 

QUESTIONER: Thank you for taking my question.  My question is, in the time of trade uncertainty, what can China do to reduce the negative impact of tariffs?  And also what can be the potential driving force of China's economy?  Thank you. 

MR. SRINIVASAN: Thanks for that question. You know, even before these trade tensions began, I remember we've been advocating for China to rebalance its economy by promoting more domestic demand. If Asia relies a lot on exports, China is, you know, a poster child of relying a lot on exports.  So we've been looking, for a long time, to rebalance the economy by boosting domestic consumption in particular.  And if you look at what we've been seeing over the past several years in the context of what's happened in the housing sector, we've talked about what China needs to do to fix the crisis in the property sector.  Because ever since the beginning of the crisis in the property sector, consumer confidence has been tanking.  Right?  And that needs to be addressed.  So you need measures to address the problems in the property sector. 

In addition to that, you need to reduce precautionary savings by working on social safety nets.  Again, these are not new recommendations; we've been saying this for some time.  And these take much more relevance now given the fact that China is being hit by huge tariffs and the region also being hit by huge tariffs.  So China at this point in time would do well to rebalance its economy towards greater reliance on domestic demand. 

I wonder if you want to add something more, Thomas?

MR. HELBLING: Maybe one point to add and that builds on our last October Regional Outlook we had, and also recent work we had in China Article IV, is the underappreciation of the service sector as a source of growth. I think partly with rebalancing towards consumption in China, there would be naturally more demand for services. But I think we also have to see that services can be a source of productivity growth, which will help longer-term growth in China.  Also face an issue of declining factor productivity growth, and services are one way to do it.  And so, reducing obstacles to service sector growth, making sure that education and labor markets are geared towards facilitating the movement of labor towards services, and opening up the market for various services would also help in the case of China and Asia more broadly. 

MS. ELNAGAR: Thank you. I will go online. So, and then we get back to the room.  Let's take Sri Lanka. 

QUESTIONER: [inaudible]

MS. ELNAGAR: Zulfick, the audio is muffled.

QUESTIONER: Can you hear me now? 

MS. ELNAGAR: Yes, thank you.

QUESTIONER: Thank you for taking my question and thank you for your presentation.  And my question is on Sri Lanka.  Earlier in the day, Managing Director Kristalina Georgieva mentioned off-the-charts relating to uncertainty in the global aspect.  My question is with regard to Sri Lanka:  now the U.S. has imposed 44 percent of reciprocal tariffs, which have been now reduced for [inaudible] and has been granted.  What is the IMF's take on this process, especially when Sri Lanka is right now emerging out of the economic crisis just several years ago, and at the same time, what sort of assistance is the IMF as a global bodies giving Sri Lanka to mitigate this crisis and negotiate tariff concessions or reductions with the U.S.?  Thank you.

MS. ELNAGAR: Thank you.

MR. SRINIVASAN: Thank you. Talking about uncertainty, which the MD mentioned this morning, as you just talked about, the team was in Sri Lanka not too long ago, and they were in the midst of having discussions with the authorities when these tariffs were announced. So for the team it became quite difficult to put together a macro framework which takes into account the tariffs and the implications they have on growth, on exports, and so on and so forth.  So that was the, you know, an example of how uncertainty can affect just operations with countries.  So we are, the team is back here, and we've continued discussions with the authorities, and so we hope to have an agreement soon on the next review, a staff-level agreement. 

The broader question is that this is a country which is affected by huge tariffs.  There's a government sector, there are a lot of -- the impact on the government sector could be quite significant.  And there are other sectors also here.  So the question, of course, is for countries like not just Sri Lanka, but all countries, they need to think in terms of a diversification of their export markets, greater integration within the region.  All these things can help diversify, can actually -- can help you mitigate the risks which come with tariffs from one country. 

Going beyond that, I think in the case of Sri Lanka, you know, investment can still be propped up.  Again, we would say when investments create an environment for domestic investment to pick up, not necessarily through tax exemption incentives.  Keep your fiscal consolidation, keep your fiscal integrity intact, but promote investment by providing an environment where private investment can flourish.  I think these are things which can be done going beyond the program we have right now.  The program has lent to a significant amount of macro stability, which has led to growth picking up, inflation coming down.  So the time is ripe for Sri Lanka to embark on broader structural reforms which will promote private investment and get growth going on a more durable basis. 

MS. ELNAGAR: Thank you, Krishna. We’ll go back to the room. Let's go to the left side this time. 

QUESTIONER: Thank you, Randa.  Thank you very much for taking on my question.  My question is on BOJ monetary policy, and are you still expecting BOJ to stick to tightening cycle, tightening monetary policy, and what is the reason? Why you expect so, even though the Japanese economy is clearly slowing down?  Thank you. 

MR. SRINIVASAN: So again, when we talk about a gradual tightening to bring inflation back to the 2 percent target and clearly the fact that there's heightened uncertainty, any kind of decision by the BOJ will be data dependent. And so, depending on how data comes in, the BOJ will be, you know, pursuing the right kind of monetary policy. So our advice is about gradual tightening of monetary policy.  It's accommodated right now, the way we see it.  And to get to the target of 2 percent by 2027, we call for gradual tightening.  This does not mean we're calling for tightening in the middle of the uncertainty.  It's all data dependent.

MS. ELNAGAR: Thank you. We’ll stay in the room. The gentleman with the glasses in the middle. 

QUESTIONER: Thank you for taking my question.  I am from Bangkok, Thailand.  IMF has revised out the growth of Thai GDP from 2.9 percent in the January prediction to 1.8 percent right now.  And it is among the lowest in our peer countries in ASEAN-5.  And last year, our GDP grew just by 2 something percent.  So my question is, what is actually, you know, the problem of Thai economy?  And the MD mentioned in the previous agenda that ASEAN-5 and also Thailand need to have more intra-trade.  So does it mean less with Thai than with the U.S. and China?  Thank you. 

MR. SRINIVASAN: So if you look at -- if you look at Thailand's exports to the U.S. as a share of total exports, it's pretty high; it's 18 percent. Right? And also, the tariff imposed on Thailand was quite significant.  So the question, of course, is if you put these two factors together, the impact on Thailand is quite significant.  This was an economy which was already slowing.  On top of that, you have the external shock, which has led to a slowing of the economy. 

The point which MD was making is, given the fact that the ASEAN region, which is the fourth-biggest block, if you take as a block together in terms of GDP, there could be a lot more intraregional trade.  It's only 20 percent right now.  So if you have greater trade within the region, that provides you a natural way of diversifying your exports.  So that's the point, which we'd say.  In addition to reforms, which could underpin a strong investment in Thailand.  We would say that diversification of export markets, including through greater intra-regional trade, would be beneficial for the Thai economy. 

I don't know whether you want to add anything more, Thomas? 

MR. HELBLING: On two factors, you mentioned why Thailand's growth has been lacking. The IMF has pointed out two factors.  One is the post-pandemic recovery, where tourism has been relatively slow to recover.  Partly also in the regional context where health measures lasted longer, so the reopening took place later.  So that's one of the factors that has contributed.  Also, we still see a negative output gap, so the economy producing below potential in Thailand.  Second, there have been longer standing structural headwinds in Thailand.  One is demographics, the aging of the population.  As elsewhere in Asia, perhaps a bit more so in Thailand, productivity growth has been lagging and so the IMF has been recommending opening up markets, working towards rescaling the labor force and upgrading public investment to facilitate also private investment and the reallocation of resources to new sector.  Also in the context of what Krishna mentioned, a very strong export orientation towards the U.S. and their scope there for diversification. 

MS. ELNAGAR: Thank you.  I'll go on Webex one more time if you don't mind.    Okay, we can take one question that came in virtually, then we go to him.  It said, why didn't the IMF reach a staff-level agreement on the third review for Bangladesh, and when are you expecting that? 

MR. SRINIVASAN: Thanks for the question.  So the IMF program is geared towards restoring macro stability, building reserves, making sure that there's significant fiscal consolidation so that you can meet the development goals and so on.  Now the two areas where we've had some -- there needs to be further discussion.  One relates to exchange rate reform, greater exchange rate flexibility, something which we've been calling for in the reform as part of the Fund supported program there.  We need to see a little bit more action and some, you know, timeframe to see that the policy is being implemented.  And similarly on fiscal consolidation there have been, you know, we've been trying to place emphasis on revenue mobilization which in the case of Bangladesh is on the lower side.  And you need to improve your revenue mobilization so that you can, you know, both undertake development priorities and boost investment.  Now, those are two areas in addition to the fact that there are some questions on the health of the financial sector.  So, there are these areas on which we are continuing discussions with the authorities.  Good progress is being made, but I won't put a timeline on when we can reach agreement. 

MS. ELNAGAR: Thank you.  Shall we try again with Webex? 

QUESTIONER:  Can you hear me? 

MS. ELNAGAR: Yes. 

QUESTIONER:  It seems that the tariff war between the United States and China is easing down.  If not, do you think Bangladesh, Vietnam, or Cambodia, who are China's competitors, can apparel export to the United States will be benefited from China-U.S. tariff war?  Thank you. 

MR. HELBLING: So, overall I think the first point I would highlight, and our Managing Director has highlighted that for a long time there are no winners from trade war.  It's bad for the global economy.  Now, I think the IMF has also promoted continuation of open rules-based trading system which benefits everybody.  And so, if, in the current context, if there is a resetting of the global trading system and working towards new rules, we think that will benefit everybody, also in Asia.  There are two factors at work.  I think greater efficiency overall.  I think we should not forget that higher tariffs on China will also have negative spillovers through the impact on Chinese growth for the region.  So we should keep this in mind.  We should also say that with what Krishna mentioned, with structural reform, greater regional trade integration, there will be opportunities for all, and that should be the base of growth.  And that's, I think, the main points I would like to highlight in this context. 

MS. ELNAGAR: Thank you.  Go to the room.  The gentleman in the back. 

QUESTIONER:  Hi.  Thanks for taking our questions.  You've alluded to this already, talking about inter-regional trade, I wondered could you give us some examples of countries within this block that are already doing this, stepping up their trade with each other and if you can give us specifics on what are they trading, what are they buying and selling with each other?  Thank you. 

MR. SRINIVASAN: So I think if you look at intra-regional trade within Asia, that's about 60 percent.  So I'm sure there are many examples I can give.  But talking about Korea, China, linkages, you can talk about linkages between Vietnam and the U.S., between Vietnam and Cambodia.  And recently there's been innovation in the financial -- there's been more financial integration in the ASEAN.  For example, where I don't know whether you were there at yesterday's talk with the Central Bank Governor of Malaysia, he talked about the fact that now you could have, within the ASEAN, you could have people selling things online and they have a common QR code and they get payment instantly.  So, these are kind of examples which can really boost intra-regional trade.  In ASEAN, it's 20 percent.  I think it's still on the lower side.  There's room to do much more there.  And I think broader-Asia, I think South Asia, for instance, the integration is very limited.  So, there are areas where within the region also, I mean, there are both region, cross-region within the whole Asia Pacific thing where much more can be done in terms of boosting trade.  So, I would say where the region which is least integrated is South Asia, there could be a lot more there.  And even within the ASEAN there could be a lot more.  If financial integration gains further momentum in ASEAN that will lead to greater trade within the region.  So, those are kind of things which can be done. 

MS. ELNAGAR: Stay in the room.  The gentleman has been waiting patiently.  Please identify yourself and your organization please.

QUESTIONER:  Good morning, Krishna. This question is for you.  Why has India's projected growth rate been revised downward to 6.2 as compared to 6.5 last year?  And additionally, can you also provide an overview of this year's projections for other South Asian nations?  Thank you. 

MS. ELNAGAR: Can we stay on India?

MR. SRINIVASAN: Thomas will take the question on India. 

MS. ELNAGAR: We have another question.  She is asking, also, about the Indian projections and why are the revisions downward?  And the second question, given the ongoing trade tensions between the U.S. and China, and India's positioning as potential Plus One alternative, do you foresee an upward revision in India's growth outlook in the near future? 

MR. HELBLING: So, in the near term this year the growth rate in India has been revised down to 6.2 percent from 6.5 percent last year and next year growth is projected just to tick up a tiny bit to 6.3 percent.  The main factor for the downward revision is the same as for the region overall, it's the increased tariffs; first, at this point, 10 percent applying universally, and increased trade uncertainty.  While India is relatively less open than other countries in the region, it still trades significantly and particularly also with the U.S.  The U.S. is a large trading partner so that affects the near-term outlook.

On medium-term growth and potential gains from a Plus One strategy, we have not revised the medium-term potential growth rate.  That is all based on announced policies.  What I would highlight however there has been a long-standing recommendation that India could benefit if it (A) opens up to trade, I think with structural reforms.  In the near-term, in particular, also on labor market reform that would increase labor market flexibility and allow labor to move to sectors with the greatest growth opportunities.

And in the longer term, work on education and also continue with the push towards public infrastructure which will increase opportunities for trade and for India to benefit from greater integration regionally but also globally.  And India, I think, like China before, we think has a lot of potential.  It has a large domestic market.  If it undertakes these structural reforms, you would have this favorable interaction of a large domestic market and benefit from specialization.  But at the moment, this is not yet incorporated as we would like to see first policy action on the structural front for these gains to materialize. 

MS. ELNAGAR: Thank you. 

MR. SRINIVASAN: If I could just add one thing.  I think one issue where we are worried about in India is private investment.  Private investment still remains quite lackadaisical.  In fact, as a share of GDP, it's not too bad compared to here.  But if you look at investment in machinery and equipment, things which can increase the productivity of the economy, that's pretty muted.  There's a paper written by my colleague here, Harald Finger and Christian, which talks about what can get private investment going.  So, if India has to reach its target of being an advanced country by 2047, the Viksit Bharat goal, then private investment needs to really pick up momentum.  And that is where a lot of reforms are needed.  Thomas alluded to some.  There are much more you can read in the paper. 

MS. ELNAGAR: Thanks.  Please.

QUESTIONER:  So I have a very broad question.  During time of financial tightening and global uncertainty, how should economies in Asia Pacific work together to mitigate the negative effect of tariffs?  Can you elaborate on the cooperation among economies, especially emerging markets? 

MR. HELBLING: On cooperation, I think we see two main avenues.  As, and I come back to what our Managing Director has said.  I think we continue to see benefits from having an open global trading system and countries to work on maintaining multilateral open trading system.  And the Managing Director called on countries to address the root causes of current tensions and try to work towards improvement.  So that's both for economies in the region, but also economies in the globe. 

Second, areas for cooperation, and that's what Krishna mentioned before, is regional integration.  There is scope to increase regional trade and financial integration in Asia.  If you look at many countries, as Krishna already mentioned, intra-regional trade integration is still relatively low in comparison.  So, there is scope through trade agreements and various accompanying measures, for example, harmonizing standards, harmonizing various administrative procedures, et cetera, et cetera, to foster regional trade.

And then thirdly, in terms of financial market volatility, there we would emphasize that having prudent and stable macroeconomic policies in the region, that this also provides a public good in the sense it provides benefits for the region, as you have perceptions in financial market, of sound macro policy frameworks, sound financial market regulation.  So the region will benefit if everybody is perceived as having sound policies, having well-regulated financial markets, and having risk at bay.  And that's also, you know, more broadly what the IMF tries to do, right, to contribute to financial stability.  Each country can contribute to that. 

And finally, let me mention, as Krishna mentioned, the impact of recent financial market stability in Asia has been relatively muted.  If you look both on the bond side, if you look at the effect side, and we think that reflects in part, improved monetary policy frameworks. 

MS. ELNAGAR: Thank you.  The lady on the left here, please. 

QUESTIONER:  Thank you for taking my question.  My question is about Taiwan. 

And my question is about Taiwan.  The IMF increase its growth forecast for Taiwan to 2.9 percent in the latest World Economic Outlook, compared with last year's projection, it was 2.7 percent.  So, I was wondering, can you walk us through the revised projection for Taiwan?  Thank you. 

MR. SRINIVASAN: Sorry to disappoint you, but Taiwan is not a member of the IMF.  So, we won't comment on the outlook.  What we have there is based on consensus forecast.  It's not our forecast. 

MS. ELNAGAR: Okay.  Let me move to a virtual question that we got on the Philippines.  The IMF said that the Philippines, unlike many countries, is facing global trade uncertainties with tame domestic inflation which can give the central bank enough room to cut rates.  That said, can the Philippines finally break away from the Fed for the remainder of the BSP's easing cycle?  And then the second question is about the outlook of the Philippines economy.  The second question is outlook on the Philippines economy amid geopolitical tensions and trade wars?  Thank you. 

MR. SRINIVASAN: Okay, on the first question, clearly, as I said in my remarks, that inflation is at or below target in many countries.  So for countries where they are, there is room to engage in monetary easing.  Of course, that said, countries do have to look at what's happening in inflation in advanced economies, what the major central banks are doing, because that has implications for movements in exchange rate, capital flows and so on.  Here we are quite clear that, you know, at the end of the day, exchange rates should be the buffer against shocks monetary policy can ease to, you know, if you do look at the policy mix, I would say that countries in Asia are better placed to engage more in monetary easing than in fiscal easing.  So given the fact that they have more space in the monetary side, if exchange rates are, there's too much volatility there, then in some circumstances you could think in terms of foreign exchange intervention.  And that's what I said.  Our integrated policy framework provides you a good playbook or a framework to think about how to manage these tradeoffs. 

But overall I would say that there is room to ease monetary policy.  Again, how central banks use that space will be data dependent.  They have to think in terms of uncertainty, they have to think in terms of volatility.  But given where they are with inflation, many countries in the region, including Philippines have the monetary policy space.  I would say less so on the fiscal side.  In terms of our outlook for Philippines, we have revised down our forecast by the growth revisions.  We have at 5.5 percent for this year and 5.8 percent for next year, which is, there has been the cumulative downgraded about 1.1 percent.  And that reflects both the fact that you have a significant external shock.  In the case of Philippines, exposure to the U.S. is not as significant as -- it's not that low either, it's about 17 percent.  So, there is still a significant exposure on the external side.  And domestic demand, even though it's relatively robust, there could be more action there.  But the fact that we Revised it by 1.1 percentage points cumulative to two years, reflects largely the trade impact and the heightened uncertainty. 

MS. ELNAGAR: Thank you.  Mindful of time we can take one more question from the floor.  Please, the lady in the back with the glasses. 

QUESTIONER:  Thank you.  I have a few questions on China's rebalancing toward consumption.  So first I wonder if you can comment on your evaluation of the steps China has taken so far to boost consumption, including things like expanded trade in program?  They've also pledged to issue some subsidies for family to boost growth, to boost bursts and some opening up of the services industry.  How do you evaluate those?  And then I also wonder if you can comment on do you think China has enough tools and systems in place to boost consumption?  Because people have talked about how China's tax system is still not very developed, and the local governments are also more incentivized to encourage production?  Do you think China has the tools and what can we expect realistically this year from China?  And then thirdly, if you can comment on the deflation trend, I wonder if you can give a forecast on how long China's deflation will last?  Thank you.

MR. SRINIVASAN: So, on your first question, the summary answer is the measures they've taken are a step in the right direction but not sufficient.  What do I mean by that?  They have taken action to help rehabilitate the property sector, but it's not enough.  There is still a whole issue of housing which is unfinished, which needs to be addressed.  The issue of triaging the developers and taking care of the unviable developers.  So, there are an issue, we had talked about a number of 5 percent of GDP which is needed over 3 to 5 years to fix the property sector.  I don't think any of these efforts come close to that.  In terms of the trade in program, again that's fine, that's again a step in the right direction, but it's not sufficient. 

So more needs to be done both on the property sector and on strengthening social safety nets.  Again, some efforts have been done in terms of the pension reform and so on and some towards building greater pension for rural areas.  But again these are all small steps.  You need much more.  The question do they have the space?  We believe that they have space in the near term.  For the short term they do have the space.  Again that has to be offset by consolidation over the medium term.  So again, spelling out what they will do over the short term, what they will do over the medium is important.  But yes, they do have the space to provide the support that's needed to boost consumption.  You want to add more? 

MR. HELBLING: As Krishna mentioned, the steps are welcome.  If you look at several steps, more can be done.  One is strengthening the pension system and the various pension systems.  So we think there's scope to strengthen the [rural] pension system where increases so far have been relatively small and where we think that further increases would map quite largely also into translation in the sense, high marginal propensity to consume. 

We also think there's scope to expand the health care system.  China has now a universal health care system, but coverage and benefits are very low.  And then one more point, in terms of government finances, we have been promoting or suggested to strengthen local government finance.  With land finance and the property sector down, they face financial constraints.  So we have been advocating fiscal reform that would strengthen, would change the system between central government and local governments that provides better funding for the large expenditure mandates that local governments have.  So, that would also be an important step for the rebalancing towards consumption, the strengthening of public services. 

In the last Article IV, we had a selected issues paper that also documented then steps on tax policy to facilitate the strengthening of local government finance.  And then as you know, we have long advocated for a comprehensive fiscal reform that would include reforms to also address the local government finance debt problem beyond the steps that have already been taken.  Thank you. 

MR. SRINIVASAN: So you have a paper to read on China and you have a paper to read on India. 

MS. ELNAGAR: Thank you very much.  We come to the end of our press briefing.  Thank you, Krishna.  Thank you, Thomas.  And thank you for attending online in person and for submitting your questions virtually.  I know we have a lot of people who are online, but unfortunately, the room has an event after this, so we have to come to an end.  The transcript is going to be posted online, and we invite you to attend the other regional briefings that are coming later.  Thank you.