IMF warns Asia's economic recovery still 'precarious'<\/p>\n
TOKYO (AFP): Asia is returning to growth but it is a
\n\"precarious recovery\" and several weaknesses still remain across
\nthe region, the IMF's head of Asian operations warned Wednesday.<\/p>\n
The Fund forecasts growth in most nations across Asia this
\nyear but is concerned about poor business investment, said Hubert
\nNeiss, director of the International Monetary Fund's Asia-Pacific
\noperations.<\/p>\n
\"Our outlook is basically positive but we have to be careful,\"
\nNeiss told a seminar in Tokyo.<\/p>\n
\"It is a precarious recovery but could be durable if the
\npresent strategy is continued,\" he said.<\/p>\n
Monetary and fiscal policies still needed to be expansive,
\nwith low interest rates and significant budget deficits. More
\ncorporate restructuring was needed.<\/p>\n
Both Thailand and South Korea would grow this year and in
\nIndonesia, the third country supported by IMF loans during the
\ncurrency crisis, the economy would shrink only one percent, he
\nsaid.<\/p>\n
\"A recovery while established is not really broad-based and
\nthere are still a number of weaknesses in the economy, in
\nparticular business investment,\" Neiss said.<\/p>\n
Another concern was the rise in the value of the Japanese yen,
\nwhich could put an end to recovery in the world's second largest
\neconomy and an engine of growth for Asia.<\/p>\n
\"A further rapid appreciation of the yen could well put an end
\nto recovery as has happened once before,\" he said. \"It is an
\nimportant risk.\"<\/p>\n
The Japanese yen has surged to seven-month highs against the
\ndollar, as foreign investors pour money into Japan hoping to
\ncatch the wave of recovery.<\/p>\n
At 1 p.m. (0400 GMT) the yen was trading at 109.38-40 to the
\ndollar, against 110.17-20 yen here late Tuesday.<\/p>\n
But Neiss said the IMF was otherwise encouraged by signs of a
\nrecovery in Japan. The Fund will likely upgrade its growth
\nforecast for Japan for the current calendar year from 0.25
\npercent to 0.5 percent, Neiss said.<\/p>\n
\"However none of us is willing to go out on a limb and declare
\nit (a recovery) all there,\" he said.<\/p>\n
In China the Fund expects growth to continue, although at a
\nslower rate than in previous years. But Beijing will not devalue
\nthe yuan in the near future, Neiss said.<\/p>\n
\"There will be no devaluation in the near future, that is the
\nfirm intention of the Chinese government,\" he said.<\/p>\n
\"The Chinese government is in a strong enough position to keep
\nthe renminbi (yuan) stable with a very comfortable reserve
\nposition.\"<\/p>\n
More important in China were problems with demand and
\nstructural reform. \"Consumption is weak as people save more in
\nanticipation of an uncertain future. Foreign investment is much
\nlower than it used to be,\" he said.<\/p>\n
\"Thorough reform has to take place to continue growth in the
\nfuture.\"<\/p>\n
In fact most countries in Asia had taken the reform steps
\nneeded to revive their economies. The use of capital controls in
\nMalaysia made little difference to bringing a recovery, Neiss
\nsaid.<\/p>\n
\"The effect of the controls by Malaysia has been largely
\nexaggerated,\" he said.<\/p>\n
\"Taking Malaysia out of the crisis has come through other
\nareas, macroeconomic and structural. Controls only played a
\nmarginal role.\"<\/p>\n
China: 6 or 7%; Indonesia: -1%; Japan: 0.25 to 0.5%;
\nMalaysia: 2.5%; Philippines: 2.25%; Singapore: 3.5%; South
\nKorea: 6.5 or 7%; Thailand: 2.5%; Vietnam: 4.5 or 5%<\/p>",
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