International Monetary Fund today said the rapid growth
in China and India, would lead Asia with prospects of
a "very positive" near-term growth outlook that
should be able to withstand a US slowdown.
its twice-yearly World Economic Outlook report, the IMF
said, questions remained, about the demand for electronics
exports from countries like South Korea, Taiwan and ASEAN
countries, and those countries that face the risk of a
shock if the Japanese yen carry trade unwinds dramatically.
observed that China was still experiencing excessive investment,
much of it by inefficient state-owned enterprises whose
investments were a burden on banks and on corporate profits.
IMF forecast emerging Asia as a whole to grow 8.4 per
cent in 2007 and 8.0 per cent in 2008, with China''s growth
for the two years to be 10 per cent and 9.5 per cent,
respectively. India''s growth was expected to expand 8.5
per cent this year and 7.8 per cent in 2008, the outlook
question in assessing growth prospects for the region
is how a sharper-than-expected slowdown in the United
States would affect the region," the report said.
fallout from a US slowdown would be "relatively well
contained" because, with the key exception of China,
the importance of the US market to the region had declined
amid growing inter-regional trade, the report said.
addition, a US slowdown reflected by the US housing sector,
would have a muted effect on demand for Asian exports,
while demand for electronics remained mostly firm. "Against
this background, the near-term outlook for growth in the
region remains very positive," it said.
the downside, a sharper-than-anticipated slowdown in the
demand for Asian exports in general, and electronic goods
in particular, could undercut growth," the IMF warned.
IMF also identified further risks coming from "financial
markets in the region, especially those that appear richly
valued," as they remain vulnerable to any unanticipated
rise in global risk aversion.
pointed out that some of the Asian economies could be
hurt by any rapid unwinding of the yen carry trade, where
investors borrow in low-yielding currencies like the Japanese
Yen to invest in purchases of currencies with higher-returns
or to invest emerging markets offering high returns. Such
investments, the report cautioned, could unwind rapidly
if investors were to revise their expectations of bilateral
exchange rates and interest rate differentials.