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The economic growth rates of South Korea, Japan and other advanced economies in Asia will improve this year due to ripple effects from expanded fiscal expenditures and US economic stimulus measures, the International Monetary Fund (IMF) predicted.

Jonathan Ostry, acting director of the Asia and Pacific department at the IMF, held a briefing Monday in Washington on the "Asia and Pacific Regional Economic Outlook."

In the briefing, he presented revised projections of 7.6% and 5.4% for the 2021 and 2022 economic growth rates of the Asia-Pacific region. In October 2020, the IMF announced a predicted 2021 growth rate of 6.9% for the Asia-Pacific region.

Within the Asia-Pacific region, advanced economies such as South Korea would enjoy relatively more benefits, the IMF predicted.

"For Korea, growth should pick up to 3.6% this year, and moderate to 2.8% in 2022, driven by favorable external environments and for manufacturing and for exports," Ostry said.

He also noted that countries such as Japan and Australia were experiencing positive spillovers from fiscal expansion policies and the US fiscal stimulus.

At the same time, he observed that the recoveries of some emerging economies such as Indonesia and Malaysia were being weakened by a rise in COVID-19 caseloads.

"For China, growth has been marked up to 8.4% this year, due to stronger net exports, reflecting higher global growth and the US fiscal stimulus. India has seen a more sizable upward revision, to 12.5%, on account of continued normalization of its economy and a more growth-friendly fiscal policy," he said.

The numbers are respectively 0.2 and 3.7 percentage points higher than the projections made in October 2020.

The IMF cautioned that rising interest rates in the US could cause potentially market-destabilizing capital outflows in Asia. According to this analysis, the US economic stimulus policies represent a potential boon to Asian economies, but one that could end up having a negative impact if it leads to a rise in interest rates.

"If US yields rise faster than markets expect, or if there's miscommunication about future US monetary policy, adverse spillovers through financial channels and capital outflows, as during the 2013 Temper Tantrum could present challenges by compromising macro financial stability ability," Ostry predicted.

By Lee Jeong-hun, staff reporter

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