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IMF: Asia Facing Slow Economic Recovery, Urges Sustained Measures

  • Daniel Schearf

The International Monetary Fund says many Asian economies are to continue to tumble this year and will take some time to recover from the global economic slow-down. The IMF says Asian governments should sustain economic stimulus policies and encourage more domestic consumption.

The new IMF report on the economic outlook for the Asia and the Pacific says the region will take longer than other parts of the world to recover from the global slow-down.

The Washington-based organization says Japan is expected this year to experience its worst recession on record.

The economies of Korea, Hong Kong, Taiwan, New Zealand and Australia are also expected to shrink.

In Southeast Asia, the International Monetary Fund says Singapore, Malaysia and Thailand will contract while the Philippines will record zero growth.

"Accordingly, we forecast that Asia's growth will decelerate to just 1.3 percent this year before rebounding to 4.2 percent in 2010, still well below the region's potential and the 5.1 percent rate recorded in 2008," said Kalpana Kochhar, deputy director of the IMF's Asia and Pacific Department.

On the positive side, China, India, Indonesia and Vietnam are expected to slow down this year, but still grow their economies.

The IMF says most Asian economies, with the exceptions of Singapore and Taiwan, are expected to grow next year as exports begin to revive.

But, Kochhar says that also depends on Asian governments continuing to stimulate their economies.

"Fiscal stimulus provided in 2009 will need to be sustained into next year. And, in many cases there is also scope for reducing interest rates further or even adopting unconventional monetary policies as in the advanced countries," said Kochhar.

Kochhar adds that Asian countries also need to maintain their foreign exchange liquidity through currency swaps or assistance from organizations like the International Monetary Fund.

Most Asian economies worst hit by the global slow-down rely on manufacturing for export as a major growth engine.

But the lack of credit in developed countries has led to what the IMF calls a "collapse in the demand" for Asian exports.

The IMF says between September 2008 and February this year, merchandise exports in emerging Asian economies fell at an annualized rate of about 70 percent - almost three times the drop experienced during the late 1990s Asian financial crisis.

In the long run, the International Monetary Fund says, Asian economies will need to change their structure to rely less on exports, since consumption in advanced countries may remain weak for years to come.