IMF Sees Strong Growth in Asia Continuing, Further Policy Tightening Needed

October 21, 2010 :

Asia remains firmly in the lead of the global economic recovery and strong growth in the region is set to continue, the International Monetary Fund (IMF) said today in its latest Regional Economic Outlook (REO) for Asia and the Pacific which was released in Jakarta, Indonesia.

The expansion in Asia exceeded expectations in the first half of the year, the IMF said, prompting the Fund to revise up its 2010 growth forecast for the region to 8 percent, nearly 1 percentage point higher than its April forecast. Economies across the region are expanding strongly.

China and India are leading the way with projected 2010 growth rates of 10.5 percent and 9.7 percent, respectively, while Indonesia is expected to grow by 6 percent. In Japan, growth is now projected at 2.8 percent. In 2011, regional growth is expected to moderate to a more sustainable pace of 6.8 percent.

Strong economic growth is leading to new policy challenges, according to the REO analysis. Inflationary pressures are continuing to build, while prices in some property markets are growing at double-digit rates. With Asia set to remain an attractive destination for foreign investment given the sluggish recovery in the U.S. and Europe, capital inflows could add further to domestic price pressures in the period ahead.

The time has therefore come for countries in the region to normalize monetary and fiscal policy stances, according to Mr. Anoop Singh, Director of the IMF’s Asia and Pacific Department. “We welcome the steps so far taken by policymakers to control inflation risks and limit the build-up of financial sector vulnerabilities, but more now needs to be done given the continued strong growth in the region,” Mr. Singh said.


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