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Booming India, China to underpin Asian growth: IMF

by Bernice Han
Singapore, Sept 14, 2006
Asia is set for another year of robust growth as the twin engines of China and India drive the emerging economies and Japan extends a recovery from its long slump, the IMF said Thursday.

Emerging Asia will see growth of 8.3 percent this year and 8.2 percent in 2007, after 8.5 percent in 2005, the International Monetary Fund said in its twice-yearly World Economic Outlook report.

The IMF had predicted growth of 7.9 percent in 2006 and 7.6 percent next year in its last report in April.

"Growth continues to run above eight percent in emerging Asia, with much of the momentum due to vibrant expansions in China and India," the Washington-based global economic watchdog and lender said.

"The outlook is for continued strong growth ... reflecting more favorable global economic conditions, continued high growth in China, and moderate deceleration in India after the strong momentum in 2005 and early 2006."

China's economy, the fourth largest in the world, will grow 10 percent this year and the next, faster than the April estimates of 9.5 percent and 9.0 percent, the IMF said.

For India, growth is projected at 8.3 percent in 2006 and 7.3 percent the following year, it said.

In April it had forecast the South Asian dynamo's economy would expand 7.3 percent this year and 7.0 percent in 2007, after 8.5 percent last year.

Japan, Asia's largest economy, is predicted to grow 2.7 percent in 2006, up from 2.6 percent in 2005, before slowing to 2.1 percent in 2007.

For Asia's newly industrialised economies (NIEs) -- South Korea, Taiwan, Hong Kong and Singapore -- overall growth in 2006 has been revised downwards to 4.9 percent from 5.2 percent, and in 2007 to 4.4 percent from 4.5 percent.

The IMF said this softer outlook reflected slower import demand from advanced economies, especially the United States, a key market for them.

Indonesia, Thailand, the Philippines and Malaysia are collectively expected to grow 5.0 percent in 2006 and 5.6 percent next year against earlier predictions of 5.1 percent and 5.7 percent.

Despite the overall upbeat outlook, the IMF cautioned of several risks, including slowdowns in the United States and Japan, both key markets for Asia's export-led economies.

Asia is also likely to be vulnerable should China's red-hot economy hit a rough patch, it said.

Other potential threats are a widely-feared bird flu pandemic outbreak and a breakdown in efforts to revive the stalled Doha Round of trade liberalization talks, the IMF said.

Asia's substantial foreign reserves build-up and persistent current account surpluses have strengthened the region's ability to withstand financial market turbulence but the region should press ahead with structural reforms to improve its defences against external risks, the IMF said.

"Policymakers across the region should take advantage of the broadly favorable growth outlook to implement structural reforms aimed at promoting fiscal sustainability and reducing vulnerabilities," it said.

Asian economies with significant public debt or budget deficits, including the Philippines, Indonesia and India, should work at improving their fiscal positions, said the IMF.

For Indonesia and the Philippines, the "the structure of public debt is associated with foreign currency risks, and continued fiscal consolidation and improvements in the composition of this debt would contribute to reducing the vulnerability to swings in global investor sentiment and enhance monetary policy credibility."

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Chinese prime minister starts two-day visit to Germany
Hamburg, Germany, Sept 13, 2006
Chinese Premier Wen Jiabao arrived in Germany on Wednesday on a two-day visit expected to be dominated by talks on trade and the Iranian nuclear crisis. German Economy Minister Michael Glos urged Wen to open Chinese markets further and to clamp down on product piracy at an economic forum called China meets Europe in the northern port city of Hamburg, which is home to 700 companies that trade with China.







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