Excessive FDI inflow into Asia may spell trouble: IMF head
21 Jan 2010
International Monetary Fund director Dominique Strauss-Kahn warned on Wednesday about the dangers of excessive capital inflows in some Asian countries, although he said the IMF sees no imminent threat of asset price bubbles.
Strauss-Kahn said on the sidelines of a two-day Asian financial forum in Hong Kong that the reverse flow of "hot money" could cause trouble to the recovering economies of Asia.
"There is a danger in too big capital inflows coming to some countries, and sometimes for some reasons, this capital inflow have a sudden stop. This creates difficulties," he said.
He predicted the world economy will grow by 3 per cent in 2010, while Asia, excluding Japan, can expect 7 per cent growth. "In advanced economies, most of the growth comes from public support and private demand is still very weak," the IMF chief said.
Regarding policies that have been put in place to overcome the crisis such as fiscal stimuli, he said finding the right time to implement exit policies is very difficult. Exiting too late would waste resources, but "if you exit too early, you have a risk of a double-dip" in recession, he said.
On China's currency, Strauss-Kahn said the yuan is unlikely to appreciate in the short term, but pressure will build up when private consumers become the driver of China's economy.
