IMF official says Asia continuing to show rebound
IMF official says Asia continuing to show rebound
HONG KONG (Dow Jones): The Asian region continues to show signs of recovery, according to Stanley Fischer, first deputy managing director of the International Monetary Fund.
Speaking Thursday in Hong Kong, he said "you never know when an economy turns, whether it is turning or you are seeing a false spring." But, he assured that indicators such as output all around Asia show "the recovery is getting underway."
Fischer said the region's recovery is happening without threatening the return of rampant inflation.
But even if prices did start to rise, the cause would be a positive, demand-driven effect, rather than a worrying supply shock, he added. Overall, Fischer said being concerned about inflation is "not high on the agenda right now."
The IMF official also said "the recoveries are domestically driven rather than foreign-driven because the export markets for this region have been very weak."
Japan's first quarter gross domestic product numbers underscore the trend, he said. "It is good news and encouraging," Fischer said, going on to suggest that the authorities in Tokyo should consider a supplemental budget later in the year.
He added a suggestion that Japan has benefited from following an IMF diagnosis for its reforms.
Fischer made a number of other points in his broad-based speech:
-An increasing number of countries are likely to try inflation-targeting as their primary monetary policy tool, he said. In the longer term, fixed exchange rates, currency blocs and policies such as dollarization are likely.
-The Asian financial crisis has shown that halfway policies on currency exchange rate systems won't work. "If you're going to have a fixed exchange rate, you'd better have a strong commitment to it," such as through legislation, he said. And, "floating exchange rates isn't the end of the story," he said.
-Policy-makers are moving to patch holes in the international economy exposed by the Asian crisis. For example, he said highly leveraged hedge funds in the future may be subject to more indirect control, by affecting the way banks lend to them. "That would change how the international system works," he said. "The work really is underway."
-China is rapidly addressing its economic problems, he said. That China is moving fast on its economic reforms even though the country isn't in a crisis is a "very good signal and sign for the prospects for China," he said.
-"Hong Kong, too, with its policies continuing on the right track has, I believe, a good possibility for recovery in the second half of the year, despite the weaknesses of the first quarter," he said.
-Corporate reforms are lagging behind work in other areas around the region, although completing the reform process will take time. "These are long-term problems that need sustained work," he said.