• search

Strong China growth to lift emerging Asia: IMF

Written by: Staff

Singapore, Sept 14: Led by China, emerging Asian economies will grow 8.3 percent in 2006, about half a percentage point more than previously thought, the IMF said in a report on Thursday.

The strong outlook for China will bode especially well for Hong Kong, Indonesia, South Korea, the Philippines, Singapore and Thailand given their strong intraregional trade ties, the IMF said in its World Economic Outlook.

The IMF in April had forecast growth in emerging Asia this year at 7.9 percent.

''Growth continues to run above 8 percent in emerging Asia, with much of the momentum due to vibrant expansions in China and India,'' the IMF said.

The fund upgraded its growth forecast for China to 10 percent from 9.5 percent and for India to 8.3 percent from 7.3 percent.

There was also a chance that both countries may expand at an even faster pace this year thanks to strong global economic conditions.

The fund said while China's central bank had allowed limited movement in its exchange rate in recent months, further flexibility was needed.

''More substantial appreciation of the currency would help to reduce the current account surplus and give the central bank greater control of domestic monetary conditions,'' the IMF said.

''The central bank's current focus on limiting renminbi fluctuations against the dollar makes effective liquidity control difficult.'' Direct measures of monetary control and limited interest rate increases by Beijing were not enough to restrain credit growth, creating worries about the possibility of an investment boom-bust cycle.

That could lead to overcapacity, weaker profits and balance sheet problems.

Other near-term risks for Asia included higher oil prices, trade protectionism, an outbreak of bird flu and slower growth in Japan or the United States.

Tighter monetary policy could also lower growth prospects.

India may need to further tighten monetary policy to fight pressures from inflation in the face of strong domestic demand and high oil prices, the IMF said.

Global markets could take a hit, hurting growth prospects, although the fund said Asian economies were better positioned to handle a downturn thanks to healthy current account surpluses and fast-growing reserves.

The regional current account surplus will likely moderate by about 0.5 percentage point to around 4.25 percent of GDP in 2006-2007.

The fund said any currency reform would need to be supported by reform in the financial sector.


For Daily Alerts
Get Instant News Updates
Notification Settings X
Time Settings
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Oneindia sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Oneindia website. However, you can change your cookie settings at any time. Learn more