Faster growth under the reformist governments of India and Japan will help cushion the blow to the world economy from a marked slowdown in China, the International Monetary Fund predicted Tuesday.

As a whole, the world's most populous region will continue to build up its share of the global economy, the IMF said in its latest World Economic Outlook report.

"Asia's growth is forecast to hold steady in 2015, and the region is expected to continue outperforming the rest of the world over the medium term," it said.

The report comes as China grapples with growth slumping to levels not seen in almost a quarter of a century.

Much of that slowdown from the breakneck growth of years past has been deliberately engineered by Beijing, as the government repositions the economy to a more sustainable path.

But it leaves global expansion more reliant on the likes of India and Japan, with the United States and Europe still struggling to shake off their torpor.

The IMF said that under reforms by India's new business-friendly government of Prime Minister Narendra Modi, the country was expected to expand at a much faster pace than previously expected.

"Growth will benefit from recent policy reforms, a consequent pickup in investment, and lower oil prices," the report said.

"Lower oil prices will raise real disposable incomes, particularly among poorer households, and help drive down inflation."

Modi swept to power last year on a pledge to revive India's flagging fortunes, and the IMF said his new broom should sweep in growth of 7.5 percent this year and next -- making it the world's fastest growing major economy.

That was a sharp increase on past IMF predictions, which had put growth at 6.3 percent in 2015 and 6.5 percent next year.

It compared with the report's expectation for China's gross domestic product (GDP) to grow 6.8 percent this year and 6.3 percent in 2016.

- South Korea stalls -

The 2015 rate, which is in line with a projection by economists in an AFP survey, would be the slowest since 1990 when the Chinese economy was hammered by foreign sanctions after the Tiananmen Square crackdown.

However, the IMF said "ongoing implementation of structural reforms and lower commodity prices are expected to expand consumer-oriented activities, partially buffering the slowdown".

The IMF upgraded its view for Japan, but warned that the prospects for a decisive break from years of recession and deflation hinged on deeper structural reforms by Prime Minister Shinzo Abe.

Japan's growth is seen at 1.0 percent this year and 1.2 percent in 2016 -- both more than double from the last outlook's forecasts.

"This increase reflects support from the weaker yen, higher real wages, and higher equity prices due to the Bank of Japan's additional quantitative and qualitative easing, as well as lower commodity prices," the report said.

But should things turn worse than expected in both China and Japan, that would reverberate worldwide "given these economies' large size and deep trade and financial linkages with other nations".

The risks, it said, were failure to implement crucial reforms in China and Japan not making structural changes.

In South Korea, "momentum has stalled somewhat", the Fund said, adding that this reflected "fragile household and investor sentiment".

Its forecast of 3.3 percent growth this year was based on "the assumption that supportive monetary and macroprudential policies and more favourable terms of trade spur a rebound in aggregate demand".

In Australia a downturn in global commodity prices is "exacerbating the long-anticipated decline in resource-related investment". However, the IMF added that record-low interest rates will help non-resource sectors.

The IMF forecast GDP growth for Australia of 2.8 percent this year and 3.2 percent next, largely in line with previous reports.

Among Southeast Asia's top five economies -- Indonesia, Malaysia, the Philippines, Singapore and Thailand -- GDP growth was seen at 5.2 percent in 2015 and 5.3 percent next year.

China's economy to grow 6.8% in 2015: IMF
Beijing (AFP) April 14, 2015 - China must carry out promised reforms and rebalance its economy to stem financial risks, the International Monetary Fund (IMF) said Tuesday, as it pointed to slowing growth over the next two years.

The IMF estimated that the world's second-largest economy will grow 6.8 percent in 2015 before slowing to 6.3 percent in 2016, maintaining its previous predictions from January.

"For China, the main risk is failure to implement the reform agenda to address financial risks, rebalance the economy, and tap new sources of growth," the Washington-based Fund said in its latest World Economic Outlook.

"Without reforms to change the pattern of growth, vulnerabilities will continue to increase, and the available policy space will shrink," it added.

The expected decline in growth from last year's 7.4 percent comes "as previous excesses in real estate, credit, and investment continue to unwind", it said, describing "an unsustainable pattern of growth that has led to rising vulnerabilities in the corporate, financial, and government sectors".

The IMF's estimate for this year matches the median forecast in an AFP poll of 15 economists earlier this week.

The National Bureau of Statistics will release the official gross domestic product (GDP) figures for the first quarter on Wednesday. China's GDP probably expanded 6.9 percent in January-March, the AFP survey showed, down from 7.3 percent in the final three months of last year.

Separately, the World Bank said on Monday that China's economy should grow by 7.1 percent in 2015, slower than the 7.2 percent rate it projected in October.

The Chinese government in March announced an official growth target of about 7.0 percent for this year, below last year's objective of about 7.5 percent.

- 'Further slowdown' -

The forecasts come as Beijing seeks to transition China's economy from its old model of investment-fuelled growth that resulted in years of double-digit GDP expansion but is now seen as unsustainable.

Authorities have expressed a willingness to accept lower growth rates as they try to make consumer spending the key driver of activity.

But investment remains crucial and the IMF cited its possible intensified deceleration, including in real estate, as a near-term risk, after a slowdown last year that followed a 2009-2012 boom.

"Some further slowdown is already factored into the baseline, but it could be stronger than expected, as striking a balance between reducing vulnerabilities, supporting growth, and implementing reforms remains challenging," the report said.

It specifically called for resource allocation efficiency to be improved with reforms in financial and state-owned enterprises.

"Reforms in the pension system and other social safety net areas will help shift the composition of growth toward domestic consumption, which is likely to prove more sustainable in the long term," it added.

The IMF also forecast that China's consumer inflation rate will fall to 1.2 percent this year after hitting 2.0 percent last year, before rebounding to 1.5 percent next year.

Beijing is forecasting consumer inflation of about three percent for this year.

Economists have expressed concerns about the risk of deflation in China, especially after January's slump in consumer inflation to 0.8 percent, the lowest since November 2009.