CNBC was informed Wednesday by the International Monetary Fund that rising Covid in China and war in Ukraine are headwinds to Asia’s growth.

“Asia faces clear headwinds both from within and outside of its borders,” war in UkraineHowever, it also includes the lingering effects of Covid now being much more pronounced in China than before,” said Anne-Marie Gulde-Wolf, the acting director of the IMF’s Asia and Pacific Department.

The outlook for Asia in 2022 was downgraded half a point to 4.9%, from 5.4% in January.

The following is a description of the product: latest World Economic OutlookOn Tuesday, IMF reduced growth projections for China to 4.4%. This is lower than the earlier 4.8% estimate. China’s target official is 5.5%

Gulde Wolf stated that inflation was a concern in many of these nations, as he said to CNBC’s Squawk Box Asia.

“In most countries, we are already seeing price pressures — the exception here being China and Japan, where price pressures remain subdued,” she said.

As the government is willing to take action, she said that inflationary pressures are being contained in China.

We are already seeing China taking fiscal and monetary policy actions. In 2022, we expect expansionary fiscal policy. “The monetary policies are also helping,” she stated.

Her conclusion was that the fiscal policies are more effective when they provide more direct assistance to “the most vulnerable”.

She stated that the U.S. Federal Reserve actions to curb inflation had already been included in the calculations of the Asian fund. But, any tightening of the U.S monetary policy could have severe consequences for Asia’s production. 

She said that there might be an impact on Asian trade as well.

The U.S. would have a high level of demand, which would lead to more Asian exports. She added that this would be a positive sign.

The official from the IMF stated that “but, if Fed actions are on counteracting supply pressures, supply-side induced price, then this could lead capital flows out to Asia.”

She added that Asia is still better equipped to deal with these types of situations.

“Most Asian nations now have comfortable reserves positions, better supervision and better monetary frames. Gulde Wolf said that they are optimistic.

However, she warned that there are still many challenges.

“At the same time, we have also seen leverage in Asia going up — higher consumer lending, increasing sovereign debt and foreign exchange pressures,” she said, pointing out that significant appreciation of the U.S. dollar could negatively impact Asia.