IMF trims growth forecasts for India, China

The International Monetary Fund (IMF) on Tuesday said it was trimming its forecasts of economic growth for India, China and other Asian developing economies due partly to slower growth in the rest of the world.

Asian "growth remains strong, although it is moderating with emerging capacity constraints and weaker external demand," the IMF said in its latest World Economic Outlook.

The IMF said it expected China's economy to grow 9.5% in 2011 and 9.0% in 2012.

That's down from its June forecast for China of 9.6% economic growth in 2011 and 9.5% in 2012.

Inflation pressures remain in China, but efforts to withdraw credit stimulus and to rein in property price inflation "have been gaining traction," the report said.

Both property price inflation and credit growth "have softened from recent record levels," it said.

The report forecast Chinese consumer prices to rise 5.5% in 2011 and 3.3% in 2012. For all developing Asia, it pegged inflation at 7.0% in 2011 and 5.1% in 2012.

The IMF said a stronger currency exchange rate, combined with certain structural reforms, would help rein in inflation while boosting domestic purchasing power and bringing China's trade surplus more into balance.

The report noted Asian economic activity moderated somewhat in the first half of 2011 owing to temporary disruptions in supply chains caused by the Japanese earthquake and tsunami, especially in the automotive and electronics sector

For all developing Asia, the IMF lowered its forecasts to 8.2% growth in 2011 and 8.0% growth in 2012, from its June forecast of 8.4% growth for both years.

The developing Asia group includes China, India, Indonesia, Thailand, Malaysia, Philippines, Vietnam and close to 20 other smaller economies.

The IMF forecast India's economy to grow 7.8% in 2011 and 7.5% in 2012, down from its June forecasts of 8.2% and 7.8%, respectively.

"Investment is expected to remain sluggish, reflecting, in part, recent corporate sector governance issues and a drag from renewed global uncertainty and less favourable external financing environment," the report said.

"A key challenge for policymakers is to bring down inflation, which is running close to double digits and has become more generalized," the report said.

The IMF forecast economic growth in the four newly industrialized Asian economies -- South Korea, Taiwan, Hong Kong and Singapore -- to slow to 4.7% in 2011 and 4.5% in 2012 from 8.4% in 2010.