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IMF Urges Asian Policymakers To Respond 'Early And Decisively' To Shifting Risks

IMF Urges Asian Policymakers To Respond 'Early And Decisively' To Shifting Risks
4/29/2013 3:52 AM ET

The International Monetary Fund called for early and decisive actions to address shifting risks in Asia, although viewing that the extent and direction of future policy depends upon each economy.

In the Regional Economic Outlook for Asia and Pacific published on Monday, the IMF said growth in Asia is set to pick up this year driven largely by continued robust domestic demand, leading a three-speed global recovery.

The lender expects the region to expand 5.7 percent in 2013 and by 6 percent next year. Nonetheless, the estimate for 2013 was lowered slightly from 5.9 percent projected in October and that for 2014 from 6.1 percent.

The IMF said the favorable outlook is accompanied by some risks. "Policymakers in the region face a delicate balancing act in the near term: guarding against the potential buildup of financial imbalances while delivering appropriate support for growth," the IMF said.

Financial imbalances and rising asset prices, fueled by strong credit growth and easy financing conditions, are building in several Asian economies, while some other regional risks are difficult to anticipate.

Such unanticipated risks could prove disruptive, given the highly integrated supply-chain network in Asia and its growing dependence on regional demand and finance.

Asia also faces risks from trade disruptions, a loss of confidence in Japan's efforts to restore economic health and an unexpected slowdown in China.

China is forecast to expand 8 percent this year, before the growth rate quickens to 8.2 percent in 2014. The IMF pegs India's growth at 5.7 percent in 2013 and 6.2 percent the next year.

The lender forecast inflation across Asia to remain broadly unchanged from 2012 and generally within central banks' comfort zones.

The IMF report focused on two aspects, namely making growth more inclusive and avoiding the middle-income trap.

Although bold discretionary fiscal action taken during the global recession was emblematic, there remains much room to make revenue and expenditure polices more growth-friendly, the IMF observed.

To sustain high rates of per capita income growth in the emerging Asia, that is potentially susceptible to the "middle-income trap", the policy agenda will have to vary by jurisdiction across a range of priorities, it said.

by RTT Staff Writer

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