IMF report says Asia to continue its solid economic performance in 2007

Asia, which recorded another year of strong growth in 2006, will continue its solid economic performance in 2007, according to the Asia Pacific Economic Report released by the International Monetary Fund (IMF) on Friday.

The emerging Asian growth rate reached 9 percent last year, reflecting continued fast growth in China and India, and is expected to moderate only slightly to 8.5 percent in 2007, said the report.

Investment in the ASEAN countries is expected to bounce back following a weak 2006 in response to lower interest rates and improved sentiment, and should also gather pace in the Newly Industrialized Economies (NIEs).

Overall, inflation is expected to remain at around 3 percent for emerging Asia this year, with India and the ASEAN countries, where inflation came down sharply in 2006, somewhat higher.

The report also said that Asian financial markets fared relatively well in the February-March bout of turbulence, and sentiment toward the region remains strong.

"As was the case in May-June 2006, the recent turbulence was seen as a correction," said the report.

Unlike the previous episode, the recent turbulence was "triggered by investor nervousness about U.S. growth, rather than inflation, underscoring the market perception that the region's fortunes are still closely linked to external conditions, particularly those in the U.S.," it explained.

"Looking ahead, Asia's high growth and solid fundamentals point to continued investor interest in the region including both direct and portfolio investments," the report said.

But the IMF also warned in the report that there were some risks to the favorable Asian outlook, especially the uncertainty of the U.S. economy.

"While global growth has become more balanced, the main risk remains uncertainty surrounding U.S. growth prospects," said the report, adding the potential for spillovers from the U.S. slowdown into consumption and Asian exports is still a "key concern."

Source: Xinhua