Asian policymakers must be ready to respond “early and decisively” to overheating risks in their economies stemming from rapid credit growth and rising asset prices, the IMF said.
Growth is set to pick up gradually this year and inflation is expected to stay within central banks’ comfort zones, the Washington-based lender said in a report yesterday. Greater exchange-rate flexibility in the region would play a “useful role” in curbing overheating pressures and coping with speculative capital inflows.
Asian economic growth that the IMF estimates will be almost five times faster than advanced nations this year, and increasing investor appetite for risk have spurred capital inflows into the region. The Bank of Japan this month joined counterparts in the US and Europe in unleashing monetary stimulus, which may fuel further currency gains in developing markets, such as the Philippines, where policymakers have stepped up efforts to cool appreciation.
“Financial imbalances and rising asset prices, fueled by strong credit growth and easy financing conditions, are building in several Asian economies,” the IMF said. “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’s Regional Economic Outlook for Asia and Pacific echoes concerns in an April 15 World Bank report that emerging economies in the region should consider reining in monetary stimulus. Japan needs to have a credible strategy to lower debt, while China’s challenge is to unwind past credit stimulus and curb the growth of shadow banking, the IMF said.
Asia will lead a three-speed global recovery, with domestic demand supported by “strong” labor market conditions, “robust” consumer confidence and household disposable income, falling unemployment rates and rising real wages, the IMF said.
Economies may also benefit from China’s growth momentum and Japan’s stimulus measures, it said.
China’s economy will expand 8 percent this year and 8.2 percent next year, while India’s GDP will rise 5.7 percent this year and 6.2 percent next year, the IMF projected.
The IMF expects growth of 3 percent this year and 2.8 percent next year for Taiwan, lower than its forecasts of 3.9 percent and 3.6 percent respectively in its report in October last year.
South Korea’s economy is forecast to grow 3.9 percent both this year and next year, lower than previous forecasts of 4.5 percent and 4 percent respectively, the IMF said.
The IMF predicts the Philippines will expand 6.04 percent this year and 5.5 percent next year, raising its projections by 1.2 percentage points and 0.5 percentage points respectively from October last year.
Still, the threat of external risks, such as the eurozone crisis, remains substantial, and while capital inflows can provide an impetus, they can also be disruptive, the IMF said.
“In the event of a severe global slowdown, capital flow reversals and falling external demand would exert a powerful drag on Asia’s most open economies,” including lower investment and employment in export-dependent sectors and possibly lower remittances by overseas labor, it said.
Risks within the region include disruption to trade from natural disasters or geopolitical tensions, it said. An economic slowdown in China led by sharply lower investment, and a rise in sovereign risk in Japan in the absence of a credible medium-term fiscal and growth strategy also pose threats.
In Asia, some nations must address fiscal deficits, especially where the gap is larger than before the financial crisis, the IMF said. At the same time, most governments also need to increase public spending on education and health, while food and energy subsidies in countries such as China, Indonesia and Malaysia should be eliminated and replaced by programs such as cash transfers, it said.
“To sustain high rates of per capita income growth, the policy agenda will have to vary across a range of priorities, including economic rebalancing, strengthening infrastructure investment, reforms in goods and labor markets, and meeting the challenges from rapid demographic change,” the IMF said.
Additional reporting by staff writer
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”