Financial officials arriving in Manila yesterday struck an upbeat note on Asia’s growth prospects in the face of continued eurozone volatility, with fiscal and monetary policies finely balancing the need to support growth while containing inflation.
Changyong Rhee, chief economist at the ADB, told Emerging Markets that robust growth across developing Asia meant that policymakers should refrain from further monetary and fiscal stimulus, while the threat of oil-driven price shocks in the near-term had receded.
“Across the region as a whole, this is not the time to loosen or tighten monetary policy, as such, though some countries might increase rates in view of elevated inflation. But, in the main, policymakers should take a wait and see approach in order to assess the ongoing eurozone crisis,” Rhee said.
The ADB predicts the region excluding Japan will expand 6.9% this year, 0.6% lower than its last 2012 forecast in September, compared with 7.2% in 2011.
Standard Chartered chief economist Gerard Lyons said: “In much of the emerging world, including China. the policy cupboard is almost full and confidence quite resilient.”
Anoop Singh, head of the Asia and Pacific department at the IMF, told Emerging Markets in an interview that China’s growth prospects remained “fairly strong and robust”. Chinese policymakers had averted the threat of a crisis in the property sector and banking system thanks to effective “administrative measures and broader macro policies”.
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| Anoop Singh, head of the Asia and Pacific department at the IMF |
He added: “The fears of [the need for] a recapitalization [of the banking system] is linked to fears of an economic hard landing if any property price bubble bursts. But there has been clear moderation of those risks and the financial system looks quite robust.”
His comments followed official Chinese manufacturing data on Tuesday, which fuelled optimism the country’s economy is poised for a soft landing having reached its trough in the previous quarter.
Singh argued that the balance of risks in Asia would shift to economic overheating and inflation concerns rather than growth. “I think Asia is coming back to a situation where it may have to be concerned about overheating pressures - assuming things remain calm and stabilise in world markets - because we see core and underlying inflation remaining relatively strong in some countries,” he said.
Against the prospect of a prolonged slump in European demand, Asia should take stronger steps to boost regional consumption, the officials said. Asian nations should not necessarily ditch its export-led growth model but focus on boosting productive imports and re-orientating trade links to regional partners, Rhee said.
China’s rising wages would help neighbouring Southeast Asian states boost their intake of foreign direct investment and export shares, given the subsequent jump in the region’s economic competitiveness relative to China, Rhee added.
This article was originally published by Euromoney’s sister publication, Emerging Markets