Senior officials point to the war in Ukraine, soaring commodity prices and a slowdown in China as risks to the region.

Asia faces the prospect of “stagflation”, a senior International Monetary Fund official warned on Tuesday, citing the war in Ukraine, soaring commodity prices and a slowdown in China as risks to the region.

Anne-Marie Gould-Wolfe, acting director of the IMF’s Asia-Pacific region, said that while Asia’s trade and financial risks to Russia and Ukraine are limited, the region’s economies will be affected by higher commodity prices and growth in European trading partners. slowing effect. department.

At the same time, inflation in Asia is starting to pick up, as a slowdown in China adds to regional growth pressures, Gulde-Wolf said.

“As a result, the region faces the prospect of stagflation with lower growth than previously expected and higher inflation,” she told an online news conference in Washington, D.C.

Growth headwinds come from a period of limited policy options, Gulde-Wolf said, adding that Asian policymakers will face difficult trade-offs between slowing growth and rising inflation.

“Most countries will need to tighten their currencies, and the pace of tightening depends on domestic inflation developments and external pressures,” she said.

Given the region’s huge dollar-denominated debt, the Fed’s expected steady rate hikes also pose a challenge to Asian policymakers, Gulde-Wolf said.

The International Monetary Fund said in its latest forecast released this month that Asia’s economy is expected to grow 4.9 percent this year, 0.5 percentage points lower than its January forecast.

Inflation in Asia is now expected to hit 3.4 percent in 2022, 1 percentage point higher than the January forecast, the report said.

A further escalation of the war in Ukraine, a new wave of COVID-19, a faster-than-expected trajectory of Fed rate hikes and a prolonged or broader lockdown in China are risks to Asia’s growth outlook, Gulde-Wolf said.

“There is a lot of uncertainty in our baseline forecast and risks are skewed to the downside,” she said.