Asia Pacific News
LAST UPDATE: June 16, 2025
Sri Lanka has ‘no room for policy errors’ in economic reforms, IMF says
Reuters
IMF Deputy MD Gita Gopinath emphasized that while Sri Lanka’s March 2023 IMF-backed reform program has restored macro stability, lowered fuel and medicine shortages, and helped achieve ~5 % growth in 2024, the country still faces high poverty (24.5 %), corruption, and domestic debt. She warned that continued governance reforms are critical and that policy fatigue could jeopardize recovery.
Insight
Sri Lanka must maintain reform momentum and not repeat past mistakes where premature policy reversals wiped out gains—this is a pivotal moment to secure a durable, last IMF bailout.
Sri Lanka plans IMF talks on ways to lure foreign investors
President Dissanayake said Sri Lanka will consult with the IMF on strategies to attract foreign investment—potentially including public sector downsizing and raising power tariffs—to secure the next $334 million tranche. He highlighted ongoing debt restructuring (~$22.5 billion) and a 15 % power tariff hike.
Insight
Coordinated IMF-backed signals and structural reforms can bolster investor confidence, but execution—especially reforming state-owned enterprises—is critical to reap foreign capital inflows.
Sri Lanka economy reports 4.8% growth in first quarter
Official data shows Sri Lanka’s economy expanded 4.8 % year-on-year in Q1 2025, signaling a deepening post-crisis recovery.
Insight
Although encouraging, sustaining such growth will require durable structural reforms, IMF support, and resilience to global shocks.
Asian Development Bank considers lifting funding ban for nuclear power projects
The ADB is reviewing its prohibition on financing nuclear projects amid surging energy demand and climate commitments in Asia. This follows the World Bank’s similar move, supported by shareholder nations like Japan and Germany, aiming to diversify clean energy funding.
Insight
This shift signals nuclear energy’s growing role in Asia’s low-carbon transition. ADB financing could catalyze state-led initiatives in coal-dependent economies—though regulatory, safety, and geopolitical factors remain crucial.
China’s factories slow, consumers unexpectedly perk up
In May, China’s industrial output grew 5.8 % y/y (a six-month low), weighed down by a weak property sector and U.S. tariffs, while retail sales climbed 6.4 % thanks to the 618 shopping festival and trade-in subsidies. Exports to the U.S. fell ~35 %.
Insight
The divergence between weak manufacturing and strong consumption shows temporary resilience, but long-term growth depends on reviving investment and resolving trade tensions.
South Korea to introduce second extra budget for this year
Reuters
The government will propose a second supplementary budget following the KRW 13.8 trn package passed in May. The new plan includes cash handouts, extended oil tax breaks, food price relief, auto purchase tax cuts, and measures to stabilize consumption.
Insight
Facing soft consumer demand and U.S. tariff pressures, Seoul is emphasizing expansionary fiscal policy to revive growth. However, fiscal prudence is needed to avoid overspending amid low inflation and subdued economic prospects.
South Korea launches task force on US trade negotiations
Seoul has formed a specialized task force led by Trade Minister Yeo Han‑koo to coordinate strategies addressing tariff and non‑tariff issues in sectors like autos, steel, semiconductors, and energy. The initiative will involve private sector input.
Insight
The move signals Seoul’s shift toward proactive engagement after a cautious campaign posture. A unified public–private approach could strengthen Korea’s hand in bargaining over critical U.S. trade barriers.
India’s trade deficit narrows to $21.88 billion in May
India’s merchandise trade deficit shrank to USD 21.88 bn in May (from USD 26.42 bn in April), driven by reduced oil and gold imports and improved export performance. Services surplus remained robust at USD 14.65 bn.
Insight
Lower commodity imports and a rebound in electronics, chemicals, and pharmaceuticals exports helped close the gap. With India pursuing FTAs and a possible U.S. deal by fall, trade policy may further support this recovery.
Bangladesh Bad Loans Hit Record as Regulator Unveils Hidden Data
The central bank disclosed that non-performing loans have reached record levels across both state-owned (45.8%) and private banks (20.2%), revealing weaknesses from political lending and weak enforcement.
Insight
The surge in bad loans threatens banking sector stability. It highlights deep-rooted governance and auditing failures, raising urgent needs for stronger regulation, provisioning, and accountability.
Vietnam says ‘narrowing the gap’ in US trade talks
Vietnam reported progress in the third round of U.S. trade negotiations (June 9–12), narrowing gaps on key issues like transshipment, non-tariff barriers, and industrial import reliance, though some challenges remain ahead of tariff deadlines.
Insight
Hanoi’s willingness to tackle U.S. demands signals its readiness to avert hefty tariffs. But sticking points around sourcing and regulatory alignment will be crucial to securing a deal before July’s reciprocal tariff suspension expires.
Thai commerce minister confident of negotiating U.S. tariffs as low as 10%
Thailand is negotiating with the U.S. to limit tariffs on its exports to around 10%, down from a proposed 25%. Talks focus on compliance improvements.
Insight
Success in tariff negotiations would support Thai exports, but depends on structural reforms and alignment with U.S. regulatory expectations.
Sri Lanka has ‘no room for policy errors’ in economic reforms, IMF says
IMF stressed Sri Lanka must avoid reversing reforms under its bailout program, with poverty and governance still major concerns.
Insight
Continued commitment to IMF-backed reforms is crucial to achieving a durable recovery and securing investor confidence.
Sri Lanka economy reports 4.8% growth in first quarter
Sri Lanka’s economy grew 4.8% year-on-year in Q1 2025, indicating steady post-crisis recovery momentum.
Insight
While positive, the recovery remains fragile and dependent on sustained reform and IMF support.
China’s factories slow, consumers unexpectedly perk up
China’s May industrial output slowed while retail sales beat expectations, showing a split between investment and consumption dynamics.
Insight
Consumption resilience offers short-term relief, but trade and property sector issues still pose long-term challenges.
South Korea to introduce second extra budget for this year
South Korea plans a second extra budget aimed at economic support through cash handouts, tax breaks, and energy subsidies.
Insight
The move reflects proactive fiscal stimulus, but raises questions over sustainability and long-term debt management.
South Korea launches task force on US trade negotiations
A new South Korean task force aims to better manage trade frictions with the U.S., focusing on key exports like steel and semiconductors.
Insight
This signals a strategic shift toward coordinated public-private negotiation to mitigate U.S. trade pressures.
Bangladesh Bad Loans Hit Record as Regulator Unveils Hidden Data
Bangladesh’s bad loans have reached record levels due to regulatory leniency and political interference in lending.
Insight
This exposes systemic risks in the banking sector, prompting calls for urgent governance reforms and stricter enforcement.
Thai commerce minister confident of negotiating U.S. tariffs as low as 10%
Thai Commerce Minister highlighted ongoing discussions with U.S. counterparts to limit tariffs on Thai goods to approximately 10%, down from a potential 25%.
Insight
Thailand’s exports could benefit significantly from lower U.S. tariffs, but success hinges on resolving compliance issues (e.g., labor, intellectual property) and coordination within ASEAN.
