Asia will continue to lead global economic growth over the next two years even as it grapples with risks including inflation, turmoil in the Middle East and the effects of Japan’s tsunami, the IMF said yesterday.
“Robust” regional growth of close to 7 percent will be fueled by exports and domestic demand, said Anoop Singh, director of the Washington-based body’s Asia and Pacific department, in the twice-yearly report. Asia’s overall economy grew 8.3 percent last year.
Growth will be driven by economic powerhouses China and India.
The IMF forecasts China’s economy will grow 9.5 percent while India will expand by about 8 percent over the next two years.
However, the fund warned of “pockets of overheating” across the region as consumer price inflation rose to 4.5 percent in February.
Higher oil and food prices are starting to feed into broader inflation and will affect the poor, the fund said. Inflation is also being driven by low interest rates in many Asian countries.
The IMF forecasts inflation will continue rising this year before easing modestly next year.
Earlier this week, the Asian Development Bank warned that surging food prices threaten to push millions more people into poverty and shave up to 1.5 percentage points off regional economic growth.
The IMF said turmoil in the Middle East and North Africa could also pose a risk by causing further spikes in oil prices, which would shave economic growth in countries reliant on oil imports, such as China and Japan.
Asian economies could also be affected if higher oil prices result in a global slowdown, which would result in a drop in demand from wealthy countries for their exports.
The IMF cut its forecast for Japan’s economic growth this year from 1.6 percent to 1.4 percent because of the March 11 earthquake, tsunami and subsequent nuclear disaster. Economic growth is expected to pick up to 2.1 percent next year as a result of increased spending on reconstruction.
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