Asian growth to remain buoyant

• Pages: 126

Page 126

Asia is expected to have another good year in 2006, according to the IMF's May Asia-Pacific Regional Economic Outlook. The report, to be launched in Hong Kong SAR on May 2, projects that regional growth will again amount to a robust 7 percent this year, the same as last year. In Japan, the recovery is expected to continue, with domestic demand strengthening thanks to robust corporate investment and a firming labor market, which is stimulating household incomes and consumption.

Meanwhile, economies in emerging Asia will continue to benefit from a surge in external demand for the region's products, especially electronics. And while domestic demand had long been tepid-China and India excepted-it has been gaining traction since early 2005.

This outlook, however, is not without significant risks, notably from rising oil prices.

These have so far had only a moderate effect on Asia's growth, because they have been associated mainly with increases in global demand, which have also led to a compensating increase in demand for Asia's exports. But this may change, since concerns about future supply have now become the prime mover of prices.

At the same time, global financial market conditions are tightening, potentially leading to reductions in capital inflows and declines in asset prices, which could put some stress on borrowers, especially consumers, who have been increasing their...