Asia stimulus must continue on rebound: IMF

Growth in Asia including Japan, Australia and New Zealand will probably accelerate to 5.8 percent next year from 2.8 percent this year, “well below” the 6.8 percent average over the past decade, the Washington-based lender said Thursday.

Asian governments have pumped more than US$950 billion into their economies by cutting taxes, distributing cash and boosting spending after the global credit crunch cut world demand for the region's exports from cars to flat-panel televisions. A rebound in shipments may be slow as consumer spending in the U.S. and Europe is “likely to remain weak for some time,” the fund said.

“Consequently, Asian countries will likely need to maintain policy support for some time,” the IMF said in its regional economic outlook published Thursday.

Asia's biggest customers, the Group of Seven economies, are forecast by the IMF to expand just 1.25 percent in 2010 as households and businesses in the U.S. and Europe remain “hobbled by the legacy of the crisis.”

The region's leaders will need to manage a balancing act by supporting Asian economies “until it is clear that the recovery is sufficiently robust and self-sustaining” without stoking inflation or “concerns about fiscal sustainability,” the report said.

“Striking the right balance will be difficult,” the IMF said. “Policy makers will need to assess the state of private demand and the extent to which it can substitute for a withdrawal of public-sector demand.”

Evidence is mounting that Asia's economies are strengthening, prompting central bankers to signal they may soon begin raising rates in coming months, following the lead of policy makers in Australia, Norway and Israel.

China, the world's third-biggest economy, expanded 8.9 percent in the third quarter, a report showed last week, stoking speculation government officials may be preparing to reduce monetary stimulus. Indian central bank Governor Duvvuri Subbarao said two days ago “it may be appropriate to sequence the !￥exit' in a calibrated way” from record monetary stimulus.

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