By DERCO ROSAL

The International Monetary Fund (IMF) expects a wave of interest rate cuts among Asian central banks, driven by strong economic performance, even as it cautions that trade fragmentation could hinder global growth.

Domestic demand in advanced Asia is set to strengthen, while emerging markets, including the Philippines, show strong growth and inflation rates remain low across the region, Krishna Srinivasan, IMF director of the Asia and Pacific department, reported.

“This means that most Asian central banks now have room to cut interest rates earlier in the year,” the director said.

“Some central banks may have been reluctant to ease before the Federal Reserve, fearing that this could put their currencies under pressure. But as the Fed has now started its own easing cycle, such concerns should have dissipated,” Srinivasan added.

Meanwhile, the external environment is challenging for Asian policymakers, with downside risks increasing due to signs of weakening global demand, particularly from the U.S. and ongoing domestic demand issues in China.

Srinivasan stressed that “no one really wins from trade fragmentation. We all pay for this with slower global growth.”

“And Asia has more to lose than others given its tight integration into global supply chains.”

Also, Srinivasan advised Asian policymakers to leverage monetary policy while focusing on budget reconsolidation to manage increased public debt and address long-term challenges like climate change and aging populations.

For Asia, the IMF has a positive outlook as emerging markets in Asia are thriving due to a large, cost-effective labor force and strong productivity.

“Emerging markets in Asia [are] doing well,” Srinivasan said.

Srinivasan reported that Asia’s economies have exceeded expectations, leading to the IMF’s upgraded growth forecast of 4.6 percent in 2024 and 4.4 percent in 2025.

This positions the region as a key driver of global growth, contributing more than half (60 percent) of it.

However, she has warned that future growth may be challenged by aging populations, artificial intelligence (AI), and climate change, thus the need for reforms.

Thomas Helbling, IMF deputy director Asia and Pacific of the department, also said that rising trade tensions are expected to hinder global growth, resulting in lower real incomes and productivity.

To address this, Helbling suggested that “the countries in the ASEAN should make a strong push for a continued, strong multilateral trading system for further trade integration.”