21 Oct 2010

IMF / ASIA PACIFIC REPORT

After leading the global recovery for a second year, Asia’s economic outlook remains positive. In an interview, IMF’s Anoop Singh cautions that inflationary pressures are emerging. IMF

Posted at: October 21, 2010 12:13 pm

Duration: 02:00

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STORY: IMF / ASIA PACIFIC REPORT 
TRT: 2:00
SOURCE: IMF
RESTRICTIONS: NONE
LANGAUGES: ENGLISH / NATS

DATELINE: 19 OCTOBER 2010, WASHINGTON DC

RECENT – WASHINGTON DC

1. Wide shot, exterior IMF

19 OCTOBER 2010, WASHINGTON DC

2. Med shot, Anoop Singh working at desk
3. SOUNDBITE (English) Anoop Singh, Director, Asia Pacific Department, IMF:
"We raised the outlook for Asia. It remains a global leader in the recovery.  Domestic demand is picking up across Asia.  Most Asian economies are now seeing output gaps closing and, therefore, and immediate challenge is the speed with which Asia exits from the policy stimulus."

RECENT – NYDERABAD, INDIA

4. Various shots, marketplace

19 OCTOBER 2010, WASHINGTON DC

5. SOUNDBITE (English) Anoop Singh, Director Asia Pacific Department, IMF:  
"Let me make two points. It is true that Asia is seeing a strong recovery in capital flows. This reflects partly the growth differential. Now, so far reserve accumulation has done more than extreme rate flexibility. Given Asia's trend, extreme rate flexibility and appreciation remains an important objective for the median term, and this will help with the rebalancing that Asia needs over the median term to sustain its recovery and growth."
 
RECENT – SEOUL, KOREA

6. Various shots, street scenes

19 OCTOBER 2010, WASHINGTON DC

7. SOUNDBITE (English) Anoop Singh, Director Asia Pacific Department, IMF:  
"We are trying to expand our presence in Asia.  We're trying to increase our emphasis on financial sector issues.   We are doing much more in terms of the dissemination of our work in our research, our regional outlook, and we have more contacts with Asian countries across the region."

RECENT – WASHINGTON DC

8. Wide shot, exterior IMF

STORYLINE:

After leading the global recovery for a second year, Asia's economic outlook remains positive, but in its latest report on the state of the region's economy, the International Monetary Fund (IMF) cautions that inflationary pressures are emerging.

In view of the strong expansion under way, the report says Asia has reached the threshold to normalize policy stances across the region.

In their twice-yearly overview of the Asia and Pacific region, IMF economists say growth in the first half of 2010 was well above trend in almost all regional economies, prompting the Fund to revise up its growth forecast to 8 percent, nearly 1 percentage point higher than its April forecast.

"We raised the outlook for Asia. It remains a global leader in the recovery. Domestic demand is picking up across Asia.  Most Asian economies are now seeing output gaps closing and, therefore, and immediate challenge is the speed with which Asia exits from the policy stimulus," said Anoop Singh, head of the IMF's Asia and Pacific Department.

Economies across Asia are expanding strongly, with China and India leading the way with projected growth rates of 10.5 percent and 9.7 percent respectively. Indonesia is expected to grow by 6 percent, while growth in Japan is projected at 2.8 percent. The report also predicts that regional growth will moderate to a more sustainable pace of 6.8 percent next year.

Inflationary pressures are continuing to build, according to the analysis, while prices in some property markets are growing at double-digit rates. IMF economists believe the time has come for countries in the region to normalize monetary and fiscal policy stances.

The report highlights the need for further tightening of monetary policy in many countries, including through greater exchange rate appreciation.  A faster withdrawal of the fiscal stimulus put in place during the global financial crisis would also help guard against the risks of overheating.

Managing capital inflows is another major policy challenge for Asia. Many investors have been attracted to the region by its bright growth prospects and exceptionally low interest rates in rich countries.  These inflows present many opportunities but they may also pose challenges for policymakers if they are associated with easy domestic financial conditions, notes the report.

Macro-prudential measures have already been taken in many regional economies to minimize risks, but more action may be needed, says the report.

"It is true that Asia is seeing a strong recovery in capital flows.  This reflects partly the growth differential.  Now, so far reserve accumulation has done more than extreme rate flexibility.  Given Asia's trend, extreme rate flexibility and appreciation remains an important objective for the median term, and this will help with the rebalancing that Asia needs over the median term to sustain its recovery and growth," said Singh.

However, the report notes that should a worsening of global economic conditions affect Asia, there is room to return to a more simulative policy stance.

Rebalancing Asia's growth remains the top priority over the medium term, suggests the report.    It recommends a broad range of reforms to support domestic consumption and investment, including strengthening social safety nets, ensuring access to credit, easing restrictions in service sectors, and improving infrastructure.

The IMF is releasing the report in Jakarta Wednesday as part of an ongoing effort to reengage with Asia.

"We are trying to expand our presence in Asia.  We're trying to increase our emphasis on financial sector issues.   We are doing much more in terms of the dissemination of our work in our research, our regional outlook, and we have more contacts with Asian countries across the region," said Singh.