Asia's economies may have been dragged by a slowdown in China, but they'll still power most of the world's growth, the International Monetary Fund (IMF) said Tuesday.
"Asia is impacted by the still weak global recovery, and by the ongoing and necessary rebalancing in China," said Changyong Rhee, director of the Asia-Pacific Department at the IMF, in a statement.
"But domestic demand has remained remarkably resilient throughout most of the region, supported by rising real incomes, especially in commodity importers, and supportive macroeconomic policies in many countries."
The Asia Pacific region is expected to grow at a strong 5.3 percent this year, accounting for nearly two-thirds of global growth, the IMF said in its Regional Economic Outlook. That would still mark a tick down from last year's 5.4 percent growth.
The IMF is forecasting India will remain the world's fastest-growing large economy, set to grow 7.5 percent this year and next as it benefits from lower oil prices. Last year, India's economy grew 7.3 percent.
It expects Vietnam will be among the region's fastest growing economies, while domestic demand will remain resilient in the Philippines and Malaysia. The IMF forecasts Vietnam's economy will grow 6.3 percent this year, down from 6.7 percent last year.
It expects Malaysia's growth will slow to 4.4 percent this year from 5.0 percent last year and it forecasts the Philippines' economy will expand 6.0 percent this year, up from 5.8 percent last year.
The IMF noted the region's downside risks loom large, ranging from slowing growth in developed markets and weak global trade, to low commodity prices and high domestic debt in certain countries.
At a press conference on Tuesday, Rhee noted that in the wake of the global financial crisis, Asia relied heavily on fiscal policy and now leverage levels in the region were much more severe than in other regions, especially levels of corporate and household debt.
At the same time, he noted that the region's corporate profitability levels were relatively low, marking a potential vulnerability if not addressed urgently.
But in the report, the IMF noted that outcomes could be more positive than its forecasts.
"Low commodity prices could be a bigger boost to the region's economies than expected; and regional and multilateral trade agreements, such as the Trans-Pacific Partnership, could benefit Asia-Pacific even before they are ratified," the IMF said.
But the outlook for individual countries varied widely.
China, which is rebalancing its economy away from a dependence on manufacturing and toward consumption, is expected to see its economic growth slow to 6.5 percent this year and 6.2 percent in 2017, from 6.9 percent last year, the report said.
"While this transition to slower but more sustainable growth is desirable for both China and the global economy, it is causing changes in the manufacturing sector over the medium-term, as heavy industries, such as steel and shipbuilding, face major consolidation to reduce excess capacity," the IMF said.
But it also noted that not all of the regional spillovers from China's economy are negative. While there are larger costs short-term from exposure to China's slowdown, Asia also reaps medium-term benefits from that greater exposure, the IMF report said.
"While ongoing rebalancing in China will weigh more heavily on Asian countries with higher exposure to China's domestic investment, exposure to China's consumption will provide a buffer and may boost exports of some countries," it said, citing in particular Chinese consumers' interest in higher-quality, high-protein foodstuffs. An increase in outbound Chinese tourists will also benefit countries that attract them, the IMF said.
In the press conference on Tuesday, Rhee said countries such as New Zealand and India, which sell consumption goods, would will likely benefit, while countries such as South Korea or Taiwan that sell intermediate or investment materials, which may need assembly within China, will likely face headwinds.
The multi-lateral lender also expects a marked slowdown in Japan's economic growth ahead. While Japan's GDP is forecast to grow at 0.5 percent this year, in-line with last year, the IMF expects it will contract 0.1 percent in 2017, hit by a widely expected increase in the consumption tax set for next year.
"This forecast does not take into account likely growth-supporting policies to offset the increase," the report noted, but it added "an ageing population and high public debt remain major drags on Japan's long-term growth."
Rhee said in the press conference that the IMF would incorporate Japan's likely introduction of growth-supporting policies into its forecasts once it knew what kind of package the country would use.
He also expressed some concern over Japan's public debt, which exceeds 200 percent of GDP, adding that the country's ability to maintain those debt levels "beats textbook economics," and that it wasn't clear how long that could continue.
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—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1