Regional Economic Outlook: Asia and Pacific

(CC) IMFThe IMF has just released its latest Regional Economic Outlook forAsia and the Pacific, entitled “Managing Spillovers and Advancing Economic Rebalancing.”

According to the study, growth in Asia is expected to pick up this year, after slowing in the last quarter of 2011, but Asian policy makers now face the challenging task of adjusting policies to support stable, non-inflationary growth.

Asia has continued to enjoy robust domestic demand against the background of fragile global growth. This has been reflected in low unemployment and robust credit growth in the region. Inflation expectations have also picked up in many countries, and capital inflows into emerging Asia have rebounded so far in 2012.

The IMF forecasts regional growth will be 6 percent this year, roughly the same level as in 2011, and about 6½ percent in 2013. But there remains considerable regional variation. While emerging Asia will remain the fastest growing region in the world, led by China and India, expanding about 8 percent and close to 7 percent, respectively, this year, industrial Asia is projected to grow only at 2.2 percent.

At the same time, the report cautions that escalation of the difficulties in Europe would clearly risk affecting Asia. In particular, a sharp fall in exports to advanced economies and a reversal of foreign capital flows would severely impact activity in the region.

The report also cites higher and more volatile energy prices as a risk for activity, and a source of difficult trade-offs between inflationary and budgetary pressures from energy and food subsidies.

The report is available here.