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, according to AP. «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. Burton said China may need to boost interest rates to cool rapid credit and investment growth. He repeated a call for a more flexible yuan. «We have long held the view that a more flexible exchange rate policy in China would be desirable, particularly from China's own economic perspective.» «In part, the limited flexibility of the exchange rate makes it difficult to use monetary instruments, it tends to encourage capital inflows, and makes problems more difficult,» he said at a news conference during the spring meetings of the IMF and its sister institution, the World Bank. Last month China raised interest rates in an effort to rein in an economy that some officials fear is booming at an unsustainable pace. China also raised reserve requirements for banks. The IMG 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, lower oil prices. «Food prices have risen for weather-related reasons in a number of countries but are not seen as a major concern for the region as a whole,» the report said. 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. Despite strong inward investments, the IMF said most countries in Asia are not facing overheating economies. «Asset prices broadly have shown sharper increases in some countries but in general, do not appear obviously out of line with economic fundamentals,» the IMF said. -- SPA
