The International Monetary Fund boosted its growth forecast for Asia this year, reflecting a rosier outlook for two of the region¡¯s largest economies and flagging a possible upward revision in its outlook for China.

Asia¡¯s economy is set to expand 4.5% in 2024 from the prior year, according to the IMF report on Tuesday. This is 0.3 percentage points higher than its October outlook for the region but a slowdown from last year¡¯s 5% pace.

The latest data has taken into account the higher forecast for India published earlier this month and China¡¯s pace, on the back of expectations that government stimulus will boost growth. On China, the IMF said first-quarter growth came in stronger than expected on robust exports and manufacturing demand, which may prompt another upward revision.

¡°Global disinflation and the prospect of lower central bank interest rates have made a soft landing more likely, hence risks to the near-term outlook are now broadly balanced,¡± Krishna Srinivasan, director of IMF¡¯s Asia and Pacific department, wrote in a blog post.

China¡¯s central government has ramped up spending this year to support an economy still reeling from a weakened property sector and to propel growth to its target near 5% this year. In India, the government ramped up capital spending by a third for 2024, the third year in a row.

China¡¯s real gross domestic product is seen expanding 4.6% in 2024 from the prior year, and India¡¯s to rise 6.8% this year, the IMF said. Officials left the 2025 regional outlook unchanged, at a 4.3% advance.

Several risks remain, the IMF said. Chief among them is a long-term property sector downturn in China, which would weaken demand and prolong deflation. Other challenges include growing fiscal deficits and risks to trade from U.S.-China tensions.

Officials also warned Asian nations of pinning too much on expectations for the Federal Reserve¡¯s path when deciding their own monetary policy. Indonesia this month unexpectedly raised interest rates to address a currency walloped by a strengthening U.S. dollar. Southeast Asia¡¯s largest economy is among many countries in the region contending with currency depreciation as the prospects of early Fed rate cuts wane.

Following the Fed ¡°could limit exchange rate volatility¡± but there are risks ¡°that central banks would fall behind (or move ahead of) the curve and destabilize inflation expectations,¡± Srinivasan wrote.