India, China Leading Dynamic Asia's Growth: IMF


Washington, April 28 (IANS) Led by India and China, growth is expected to reach around 8 percent in emerging Asia, the International Monetary Fund (IMF) said today in its latest Regional Economic Outlook (REO).

With both exports and domestic demand fuelling rapid economic growth, economic growth in the Asia and Pacific region is expected to remain robust this year and next, the regional outlook released in Hong Kong said.

Growth is expected to be led by India and China, whose economies are presumed to expand by 8 percent and 9.50 percent, respectively, in the next two years, noted Anoop Singh, Director of the IMF's Asia & Pacific department

Their growth will have important spillovers for other countries in the region (and the world), particularly through demand for commodities, the IMF said.

In India, base effects and policy tightening are projected to slow growth from 10.50 percent in 2010 to a more sustainable 8.25 percent in 2011 and 7.75 percent in 2012.

In China, growth is expected to moderate from 10.33 percent in 2010 to 9.50 percent in 2011-12, as policy tightening slows investment.

"Looking ahead, a key challenge for Asia's policymakers remains to achieve balanced, sustainable, and more inclusive growth over the medium term," Singh said.

He noted the need to reduce inequality through inclusive labour markets, which would guard against risks to social stability, and to develop new engines of growth by strengthening private domestic demand.

Noting that the Asia and Pacific region entered 2011 with healthy economic momentum, the outlook said in late 2010 thanks to both domestic demand and exports, growth remained robust in India and Korea.

Helped by favourable weather and a strong run-up in prices, agricultural production also accelerated in late 2010 in many regional economies, particularly India and the Philippines.

Despite some monetary tightening in several economies, the real cost of capital remains well below both pre-crisis levels and historical averages and bank credit has continued to accelerate in the region, it said.

Corporate equity and debt issuance (local and external) increased strongly during 2010, especially in ASEAN-4 economies, China, India, and Korea, partly reflecting increasing risk appetite from foreign investors.

In nominal effective terms, exchange rates have also weakened somewhat since October 2010 in China, India, and the ASEAN-5 economies.

In real effective terms, however, the weakening has been smaller, owing to high inflation in these economies, and the Indian rupee has actually appreciated.

Headline inflation in Asia has accelerated since October 2010, mainly owing to higher commodity prices.

Inflation is projected by IMF to be above or close to the upper range of targets in Australia, India, Indonesia, Korea, the Philippines, and Thailand.

Despite the slowdown since late 2010, portfolio inflows to emerging Asia are expected to continue over the next two years, especially in India and the ASEAN-5 economies, the REO said.

  

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Title: India, China Leading Dynamic Asia's Growth: IMF



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