People crowd a street filled with stores as they shop in Manila on Feb 4, 2022, after authorities issued relaxation of COVID-19 rules. (TED ALJIBE / AFP)

The Asian region faces a "stagflationary" outlook, a senior International Monetary Fund official warned on Tuesday, citing the conflict in Ukraine and a spike in commodity costs as creating significant uncertainty.

While Asia's trade and financial exposures to Russia and Ukraine are limited, the region's economies will be affected by the crisis through higher commodity prices and slower growth in European trading partners, said Anne-Marie Gulde-Wolf, acting director of the IMF's Asia and Pacific Department.

Monetary tightening will be needed in most countries, with the speed of tightening depending on domestic inflation developments and external pressures.

Anne-Marie Gulde-Wolf, acting director of the IMF's Asia and Pacific Department

Moreover, she noted that inflation in Asia is also starting to pick up.

"Therefore, the region faces a stagflationary outlook, with growth being lower than previously expected, and inflation being higher," she told an online news conference in Washington.

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The headwinds to growth come at a time when policy space to respond is limited, Gulde-Wolf said, adding that Asian policymakers will face a difficult trade-off of responding to slowing growth and rising inflation.

"Monetary tightening will be needed in most countries, with the speed of tightening depending on domestic inflation developments and external pressures," she said.

The US Federal Reserve's expected steady interest rate hikes also present a challenge to Asian policymakers given the region's huge dollar-denominated debt, Gulde-Wolf said.

In its latest forecast issued this month, the IMF said it expects Asia's economy to expand 4.9 percent this year, down 0.5 percentage points from its previous projection made in January.

Inflation in Asia is now expected to hit 3.4 percent in 2022, 1 percentage point higher than forecast in January, it said.

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A further escalation in the conflict in Ukraine, new COVID-19 waves and a faster-than-expected Fed rate hike trajectory are among risks to Asia's growth outlook, Gulde-Wolf said.

"There is significant uncertainty around our baseline forecasts, with risks tilted to the downside." she said.