IMF forecasts strong economic growth in Asia to continue

The Jakarta Post

WASHINGTON (AP): Led by China and India, Asia recorded strong economic growth in 2006 and the outlook for the rest of this year is for the solid performance to continue, the International Monetary Fund said Friday.

Growth for the region is expected to moderate in 2007 to just over 7 percent down slightly from 7.6 percent last year, said David Burton, director of the IMF's Asia-Pacific Department, presenting a report on the outlook for the region.

"This moderation reflects an easing of external demand, particularly from the United States but also assumes an effective tightening of (monetary) policies in China and India," he said.

Burton said the region faced risks from a larger than expected slowdown in the United States and a spike in oil prices, underscoring the fact that the region's fortunes are closely linked to external conditions.

The report breaks Asia down into an industrial area -Japan, Australia and New Zealand - and emerging area comprising South Korea, China, India, six other countries and Hong Kong and Taiwan.

Growth for the industrial Asia was 2.3 percent in 2006 and is projected to hit 2.4 percent in 2007, the IMF said.

"In industrial Asia Japan's expansion remains solid and growth should continue to firm in Australia and New Zealand," the report said.

In China, rapid growth continued to be largely investment led, the IMF said, although exports have been contributing a growing share.

India's domestic demand gained more momentum, taking growth there to more than 9 percent in 2006, the IMF said.

Exports for the region "were buoyant in 2006, although there was a loss of momentum late in the year, particularly in technology goods" and "some uncertainty to the near-term outlook," the report said.

The IMF said inflation pressures were contained in much- though not all - Asia, the IMF said. Factors holding inflation down included soft domestic demand, some appreciation of exchange rates, tightening monetary policy, and to a lesser extent, loweroil prices.

Overall, inflation is expected to remain at around 3 percent for emerging Asia this year, the IMF said, with India and the ASEAN countries- Indonesia, Thailand, Malaysia and the Philippines - somewhat higher.