Asia needs to bolster domestic demand for sustainable growth: IMF

SEOUL, Oct. 29 (Yonhap) -- Asian economies are "rapidly" rebounding on the back
of state-led stimulus measures, but it remains unclear whether the recovery has
gained momentum enough to ensure sustainable growth, the International Monetary
Fund (IMF) said Thursday.

Individual nations must bolster domestic demand to offset still-slumping external
demand, it said in a report on the region unveiled in time for an economic
outlook forum held in Seoul.
"Over the medium term, policymakers will need to find a new momentum to return
to sustained, rapid growth in a new global environment of likely softer G7
demand. In this new world, Asia's longer term growth prospects may be determined
by its ability to recalibrate the drivers of growth to allow domestic sources to
play a more dynamic role," the report said.
Global conditions are expected to improve "gradually" in 2010 but the economy in
the richest seven countries will recoup only half of the estimated contraction
for 2009. This will dent outside demand for Asian countries' products for the
time being, the IMF claimed.
"The primary driver of Asia's recovery has been a progressive return towards
normalcy following the abrupt collapse in global trade and finance at the end of
2008," the report stated.
"Just as the U.S. downturn triggered an outsized fall in Asia's GDP because
international trade and finance froze, now their normalization is generating an
outsized Asian upturn."
The Washington-based organization added that the other key driver for its rebound
is "rapid and forceful" policy response based on its relatively sound fiscal
positions and corporate health, which gave each nation a leeway for a sharp
interest rate cut and expanded government spending.
But the IMF noted that Asian countries will face a challenge of pushing for
stimulus measures without causing inflationary pressure.
"Policymakers will face two major challenges. In the near term, they will need to
manage a well integrated balancing act, providing support to the economy until
the recovery is sufficiently robust and self-sustaining while ensuring that the
support does not ignite inflationary pressures or concerns over fiscal
sustainability," the organization said.
kokobj@yna.co.kr
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