Asia's overall growth is expected to remain strong in 2007, moderating slightly to just over 7 percent, according to the IMF's latest regional outlook.
China and India will continue to lead the way, with growth rates of 10.0 percent and 8.4 percent, respectively. Japan, the largest economy in the region, is likely to see growth broadly unchanged at 2.3 percent as the recovery firms up.
David Burton, head of the IMF's Asia and Pacific Department, told a press briefing on April 13 that the forecast reflected a modest easing of external demand, particularly in the United States, and also assumed an effective tightening of policies in China and India.
With an expected moderation in export growth, the regional current account surplus is forecast to stabilize at about 4¼ percent of GDP. "A further rebalancing of growth away from exports and toward a greater reliance on domestic demand will be important over the medium term to put growth on a more sustainable footing," Burton said.
Inflation pressures are contained throughout much of Asia, albeit less so in India and Vietnam, according to the report. In a few countries, high credit growth and, in some cases, asset price rises are causes for concern, and the authorities will need to remain vigilant and ready to further tighten monetary conditions as needed.
"Asian financial markets demonstrated their resilience in the bouts of global market turbulence seen in mid-2006 and again in February-March of this year, generally faring better than emerging markets in other regions. Looking ahead, Asia's good economic prospects point to continued strong investor interest in the region," Burton said.
On balance, the risks to this positive forecast are on the downside, reflecting the possibility of slower-thanexpected growth in the United States, an upward spike in oil prices, and a return of financial market turbulence. An upside risk to growth stems from India and China to the extent that measures to cool those economies fail to gain traction.
Although economic prospects for the region remain strong, policymakers nevertheless face a range of challenges, including issues relating to the integration and...