The International Monetary Fund’s latest quarterly World Economic Outlook forecasts global growth of 3.9 percent this year as the world economy hums along and nations retain supportive fiscal policies.

The fastest-paced expansion will remain concentrated in Asia, it predicts, where the buoyant economies of China, India and a host of Southeast Asian nations will perform well above the global average.

The IMF left unchanged from January its growth estimate for China of 6.6 percent for 2018 and 6.4 percent in 2019. The country’s own 2018 target is around 6.5 percent.

China reported Tuesday that its economy had grown 6.8 percent in the first quarter, maintaining the same pace as the fourth quarter.

India is widely expected to be the next global growth juggernaut.

The IMF foresees the nation’s economy surging by 7.4 percent this year and 7.8 percent in 2019, also unchanged from its previous outlook in January.

The two Asian giants have seen their economic prospects brighten amid strong global demand for their exports and as their massive populations start spending, the IMF said.

ASEAN Will Shine

Southeast Asia’s booming economies of Indonesia, Malaysia, the Philippines, Thailand and Vietnam will collectively maintain growth above five percent this year and next, the fund said.

“Emerging Asia, which is forecast to continue growing at about 6.5 percent during 2018–19, remains the most important engine of global growth,” the fund wrote.

Global trade jumped 4.9 percent last year, the fund estimated, with China’s exporters being among the largest beneficiaries.

Their prospects are less certain amid US President Donald Trump’s threats to impose tariffs on up to $150 billion worth of Chinese goods as part of his “America First” agenda.

“Growing trade tensions and risks of a shift toward protectionist policies, and geopolitical strains” are among the greatest concerns, the fund said.

“An increase in tariffs and non-tariff trade barriers could harm market sentiment, disrupt global supply chains, and slow the spread of new technologies, reducing global productivity and investment,” the fund said.

Debt Risk Concerns

Ballooning debt in both India and China has been a top concern for the IMF in recent years. Last year the fund said China’s credit growth was on a “dangerous trajectory”.

In India spiralling bad debt forced the government to recapitalise state-owned banks to the tune of $32 billion in October to help them clean up their books.

Chinese policymakers have delayed cutting debt, instead allowing for “stable and rational debt rises” this year to maintain growth. The IMF said officials were “eroding valuable policy space” but applauded regulators’ efforts to rein in the riskiest portion of its lending known as shadow banking.

“Nevertheless, total credit growth remains high,” the IMF wrote.

In India public banks are saddled with bad loans, making it hard for them to continue to fund the economy.

The debt and credit quality problems at banks will “exert a drag on investment in India”, the IMF wrote.

The IMF’s consensus is that despite the risks, Emerging Asia will continue to help power global growth in the year ahead.