Economic growth in the Asia-Pacific region is expected to slow in 2022 and 2023, the International Monetary Fund said in a report released on Friday.

This reflects headwinds on multiple fronts, including global financial tightening and the Russia-Ukraine conflict, the report said.

The IMF said that Asia’s strong economic rebound earlier this year was fading, with a weaker-than-expected performance in the second quarter.

It lowered its growth forecast for Asia-Pacific to 4% in 2022 and 4.3% in 2023, down 0.9 and 0.8 percentage points, respectively, from its April forecast.

The April outlook is well below the 5.5% average over the past 20 years.

However, according to Krishna Srinivasan, director of the Asia-Pacific Department of the International Monetary Fund, “Asia remains a relative bright spot in an increasingly bleak global economy.”

The U.S. Federal Reserve has become more aggressive in tightening monetary policy, the report said.

U.S. inflation remains high. This translated into tighter financial conditions in Asia.

Most but not all countries in Asia have seen a deterioration in their terms of trade, a significant factor in currency depreciation so far this year, the report said.

Srinivasan said that for policymakers, further monetary tightening is needed to ensure inflation is back on target and inflation expectations remain well anchored.

He also suggested that fiscal consolidation is needed to stabilize public debt and support the stance of monetary policy.

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