Asia 'going strong', says top IMF official

We did our predictions in January and we are now updating them. Asia is doing very well. For Asia as a whole, growth is about 6 per cent. Emerging Asia is about 7 per cent and as you know, China and India are 7 per cent to 8 per cent. So Asia is going strong. What is most important is helping global growth and providing more of a stimulus to the global economy. It is very important coming from Asia.

 

How about the prospects for Asean?

Asean is doing well. We did the predictions in January and updated Asean as a group. Asean will grow by 5 per cent this year. Now, Asean is composed of different economies. 

As for Thailand, which is recovering from the floods from last year, growth this year should be about 5.5 per cent.

Indonesia, which has a stronger domestic-demand component to its growth, should grow by about 6 per cent. Some other economies that are more dependent on global trade such as Malaysia and Singapore will grow by less than 5 per cent. So you will have balanced growth, but as a group it will be about 5 per cent.

 

Thailand was affected by the floods last year. Are you optimistic about the pace of recovery in this country?

We had a team here a few weeks ago and they are writing a report. I think from all accounts, we agree with the Bank of Thailand, and we’re probably looking at a strong reshaping of the country. We expect growth this year to be about 5-5.5 per cent. It is going to be a strong period. It’s going to be a good recovery, a good reshaping of Thailand.

Are you going to express caution about the government’s plan for massive fiscal spending in the aftermath of the floods?

Our team has had very good discussions, but the main point I would say is that the outlook looks good for Thailand. I think inflation’s under control and growth is coming back. The outlook looks promising.

 

You are quite optimistic about Asia. But let’s take a look at Europe. The crisis there is still dragging on and we also see economic weaknesses in the US. How is it possible that Asia is still growing? Is Asia going to decouple from Europe and the United States?

This is a very important point. 

I’ve discussed it in the conference and I’m trying to show that in many parts of Asia, the contribution of external demand for exports has come down because of what you said about the economies in the US and Europe. But also it is the case that the contribution to growth within Asia from domestic sources is building. I think that is the challenge for Asia in the coming years: How do you get more dependent on domestic demand?

 

Some countries that would like to rely on domestic consumption or domestic demand to drive growth might run into bubbles, such as in the case of China’s real-estate sector. Are you concerned about overheating in some economies, especially China?

What we did see in recent months is that because of the measures the government has taken, property prices have moderated and stabilised. And I would say the challenges from property prices are being seriously addressed in China and have now stabilised. As you look ahead, Asia has been very good in being cautious about growth, inflation and trade-offs.

And Asia realises that it needs to build a new growth model. At the same time, Asia knows that it is important, also for overcoming inequalities, to keep inflation under control.