Led by China, India and Indonesia, Asia is emerging from the global economic crisis sooner and stronger than any other region, according to a top International Monetary Fund (IMF) official.
Measured from peak to trough, real GDP has fallen by nearly 4 per cent in the United States, but it fell by more than 8 per cent in Japan and by about 7 per cent in emerging Asia, excluding China, India and Indonesia, the First Deputy Managing Director of IMF, John Lipsky noted on Tuesday.
"Fortunately, the global economy has begun to pull out of recession, and Asia looks set to emerge from the downturn both sooner and stronger than any other region," he said at the Federal Reserve Bank of San Francisco Conference in Santa Barbara.
The IMF's latest World Economic Outlook forecasts global economic contraction of about one per cent this year and expansion of around 3 per cent next year.
At the same time, Asia is expected to grow by 2.75 per cent this year and by 5.75 per cent in 2010.
"Strikingly, the three fastest growing economies in the G-20 are all from Asia - China, India and Indonesia - with China projected to grow 8.5 per cent, India 5.5 per cent and Indonesia 4 per cent this year," Lipsky said.
Some Asian countries - particularly advanced and export-dependent economies that have experienced a relatively large cyclical weakening of their fiscal positions - are planning to withdraw fiscal stimulus over the course of 2010 in response to the signs of recovery, he said.
"However, these plans should proceed cautiously until the recovery seems assured," Lipsky suggested.
At the same time, fiscal credibility could be enhanced by announcing concrete medium-term consolidation plans. Such plans will be particularly relevant for those countries starting from relatively high debt levels, including Japan, India, and Malaysia, he said.
With the recovery still tentative, inflation risks currently low, and limited asset price increases so far, a near-term tightening of monetary policy would be premature for most countries, Lipsky said.
But there are a few exceptions where action may be appropriate sooner then elsewhere; Lipsky said noting that in India, core inflation and inflation expectations are rising as industrial production has recovered rapidly.
And in China, growth is accelerating and the extraordinary pace of loan growth in the first half of 2009 raises the risk of future loan quality problems.