Asian economies from China to India will grow faster than expected through next year, far outpacing recoveries in the West, thanks to aggressive government stimulus spending and a pickup in global trade, the IMF said yesterday.
But the region’s rapid expansion will remain below the levels seen in the decade before the economic crisis as consumers in the US and other large industrialized nations curtail their spending on Asian-made electronics, cars and other goods in the face of rising unemployment and other legacies of the downturn, the fund said in a report.
“Asia has not decoupled from the rest of the world,” the IMF said, wading into a broader debate over whether the region’s prospects hinge on the West. “In fact, Asia’s fortunes remain closely tied to that of the global economy.”
The fund raised its forecast for Asia, saying the broader regional economy that spans countries from New Zealand to India would grow 2.75 percent this year and 5.75 percent next eyar. That’s still below the average of 6.7 percent over the past decade. Both projections were about 1.5 percentage points stronger than those estimated by the fund in May.
Economies in the seven leading developed countries, meanwhile, were seen as shriveling by about 2.5 percent this year and growing only 1.25 percent next year.
China’s economy, the world’s third largest, expanded at an 8.9 percent pace in the third quarter on the back of lavish government stimulus and bank lending. In South Korea, the economy grew last quarter at its fastest rate in more than seven years.
For the full year, China is expected to outperform with growth of 8.5 percent and 9 percent next year, the IMF said.
Japan, the world’s No. 2 economy, is expected to contract 5.5 percent this year before turning around next year to grow 1.75 percent.
Except for China, India and Australia, whose economies are staging quicker recoveries than most, Asian countries should ensure government policies continue to prop up their economies next year, the fund said.
Steps to restrain the easy flow of money, through interest rate hikes and other monetary tightening, won’t be necessary anytime soon because recoveries are still fragile and risks of inflation low.
Over the longer run, the fund said Asian countries would have to let their currencies appreciate. China, for example, has long held down its currency, a policy that’s boosted demand for exports but which analysts say has contributed to economic imbalances that hinder broader and sustainable growth in the region.
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