Global financial turmoil will continue to have an impact on Asia even after a year, the International Monetary Fund (IMF) said today.
"Global financial stresses and the process of deleveraging by financial institutions are expected to continue beyond next year. This will dampen economic prospects in the region via a number of potential channels," the IMF said in its Regional Economic Outlook for Asia and Pacific.
The channels, which would show the dampening economic prospects of the region include falling equity prices and confidence more volatile capital flows, and lower demand for exports, the IMF said.
The funding agency said that with the global dampening of exports, growth in the region is expected to come mainly from domestic demand, which is again slated to fall.
"A severe global recession, combined with a deeper-than-expected credit squeeze, would have significant spillovers to the region, through both exports and a range of financial channels," the funding agency said.
The report further added that it is still unclear how domestic demand would stand up to sharp decline in export growth and tighter financial conditions.
It said that in the near term falling commodity prices may exert deflationary pressures on Asia, while they are tentatively also expected to return to a high and volatile medium-term equilibrium, which may increase already high inflation volatility.
