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IMF raises Asian economic growth forecasts

A Chinese man in a suit catches a nap during lunch hour as a homeless man walks by in Beijing yesterday. China's economy grew by 10.2 percent in the first quarter compared with the same quarter last year, the government said yesterday. PHOTO: AP

The IMF raised its growth forecast for Japan and the rest of Asia this year, citing rising Japanese consumer spending and faster-than-expected expansions in China and India.

The IMF in its semi-annual World Economic Outlook report released on Wednesday in Washington raised its forecast for Japan to 2.8 percent from the 2 percent it expected in September.

The lender increased its forecast for the rest of Asia to 7.9 percent from 6.9 percent, raising its projection for China to 9.5 percent from 8.2 percent, and for India to 7.3 percent from 6.3 percent.

"Japan's recovery is really firmly based and it is driven by domestic demand," said David Burton, director of IMF's Asia and Pacific Department, in an interview in Washington. "For the rest of Asia, the pace of growth is expected to continue at a decent level this year and next."

Increased worldwide demand for mobile phones, digital cameras and flat-screen televisions made by companies such as Samsung Electronics Co is spurring expansion in Asian technology exports in China, South Korea and other nations.

India's economy averaged 8 percent annual growth the past three years, making it the second-fastest growing major economy after China.

"Growth in China remains very strong, with investment growth running at a high rate and net exports increasing significantly," the IMF report said. "In India, growth remains rapid, with strong momentum in the manufacturing and services sectors."

Burton said China's growth rate could exceed the IMF's 9.5 percent forecast for this year and 9 percent for next year.

"What leads to higher growth in the short-run could lead to difficulties in the medium term," Burton said.

"It could mean too much investment in wrong places, excess capacity in certain sectors, nonperforming loans for the banking system," he said.

An expansion in Japan, the world's second-largest economy, is stoking demand for goods shipped from its Asian neighbors, the IMF report said.

Japan's economy, which has suffered three recessions since 1991, expanded at its fastest rate in five years last year.

"The ongoing domestic demand recovery in Japan is particularly helpful" for Asia, the IMF said.

The World Bank and the Manila-based Asian Development Bank (ADB) have also increased their Asian economic growth forecasts.

The World Bank on March 30 raised its forecast for East Asia, which excludes Japan and the Indian subcontinent, to 6.6 percent from a November estimate of 6.2 percent.

The ADB said on April 6 it expects Asian economies excluding Japan to expand 7.2 percent this year, faster than its September estimate of 6.6 percent growth.

The IMF yesterday said threats to Asian economic growth include a possible outbreak of avian influenza, rising oil prices and any increase in trade protectionism in developed economies.

"Avian flu is a significant, if difficult to quantify, risk" the organization said. "Oil prices remain high and volatile."

"Oil and other commodity prices are going to have some effect over time," Raghuram Rajan, IMF chief economist, said in an interview.

"But I don't see any dramatic things knocking the growth out [in Asia]," he said.
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