Asia is growing strongly in 2021, but there is still much uncertainty and risk to the economic outlook, the IMF says in the newly released Asia Pacific Regional Economic Outlook released Tuesday (April 13) in Washington, DC.

The Fund says that the first priority for all countries should be to find effective measures to combat the spread and impact of COVID-19.

“History must not be allowed to become destiny. Our first priority is to ensure that vaccines are widely available and to overcome vaccine hesitancy. Boosting vaccine supply and administration capacity are essential to underpin the recovery. Fiscal support targeted towards vulnerable groups should remain accommodative until private demand recovers,” said Jonathan Ostry, Deputy chief of the IMF’s Asia Pacific Department.

The recovery continues to rely on export-led growth, drawing strength from the US and China in particular. But that carries some risk, Ostry said.

“For export-oriented economies in Asia with strong linkages to the United States, the US fiscal expansion will provide positive spillovers through the trade channel. But US interest rates are already on an upward trajectory and this is spilling over to Asian emerging market economies. If US yields rise faster, the markets expect or if there is miscommunication about future US monetary policy adverse spillovers through financial channels and capital outflows, as during the 2013 taper tantrum, could present challenges by compromising macro financial stability ability.”

While growth is firmly in place in China, Japan and Korea, the countries of the ASEAN region face challenges.

“The ASEAN region is in the throes of a resurgence of the pandemic, most notably in Indonesia, Malaysia and the Philippines. And so vaccine rollouts there are urgently needed. And the containment policies to deal with the transition to the vaccine rollout will be costly economically, but they are necessary.”

Bangladesh had been in a growth spurt prior to the pandemic. It is facing a resurgence in infection that is weighing on the economy, Ostry warned.

“Bangladesh is in the throes of of another wave of the pandemic, and this is presenting challenges and downside risks to growth. The challenge for policy is to sustain the effective response that Bangladesh made during the initial phase of the pandemic, including supporting its most vulnerable through social safety nets, through support for the agricultural sector and so forth. So this this is this is the challenge going forward.”

A full copy of the report can be found here