Asia Leading Global Recovery, Says IMF

• Author: International Monetary Fund

Growth in the region is expected to reach 2.8 percent this year, increasing to 5.8 percent in 2010, with emerging economies such as China and India turning around even more strongly.

"Despite a difficult first quarter in the region, an economic turnaround now appears under way in many parts of Asia," said Anoop Singh, Director of the IMF's Asia and Pacific Department, during a press briefing at the IMF-World Bank Annual Meetings in Istanbul on October 4. The IMF published its global forecast on October 1.

Asia's turnaround

Singh said Asia's economic rebound had been helped by swift and forceful action from policymakers, including robust government spending, monetary accommodation, and measures to restore and stabilize financial markets.

"The fiscal stimulus in Asia was substantial-larger than the G-20 average-and was quickly deployed," he said, referring to the Group of 20 industrialized and emerging market countries.

The Asian region was severely hit through both trade and financial channels during the slump. Exports fell throughout the region, capital flowed out of Asia, and industrial production dropped precipitously.

The turnaround began in the first half of this year, with growth rising to 2½ percent for the region as a whole in the second quarter. The IMF official expected around half of the region's growth this year would come from strong public sector demand, more than offsetting the drag from net exports.

Protecting the recovery

However, Singh warned against a premature withdrawal of stimulus that might threaten Asia's economic recovery.

"Many countries in Asia have had a long history of fiscal discipline and this affords them significant scope to continue providing fiscal support to the economy," he added.

"The region's central banks also have the room to maintain accommodative monetary conditions until there are clear signs of a sustained growth in private demand," said Singh.

Singh called on policymakers in the region to focus on bolstering private demand, noting that, looking ahead, "the impetus for Asia will need to come from within and policymakers...