## Dealing with Uncertain Economic Times: The Outlook for Asia

_IMF Blog, October 13, 2011_

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## Bibliographic details
- Authors: Anoop Singh
- Published: October 13, 2011

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### Overview
- Author: Anoop Singh
- Date: October 13, 2011
- Key premise: Recent large equity sell-offs across Asia and safe haven flows into Japan illustrate the region’s vulnerabilities to further global shocks.
- Exact quoted assessment from the IMF’s Managing Director: “what makes the situation all the more urgent is that it has implications for every country.”

### Regional outlook and immediate vulnerabilities
- The region’s fundamentals—built up over the past decade—remain relatively strong.
- Economic uncertainties in Europe and the United States pose large downside risks.
- Recent market behavior: large equity sell-offs across Asia and safe haven flows into Japan.
- View from Tokyo is described as “more serene than the view from other advanced country capitals, but there are storm clouds on the horizon.”

### Policy balancing act
- Domestic demand in Asia has been rather resilient, in contrast to most advanced countries.
- Factories are working at near full capacity and unemployment is low.
- Overheating is the main concern in a number of economies, with credit growing strongly and inflation remaining stubbornly high.
- Growth in Asia is slowing, mainly due to weakening external demand.
- Policy challenge summarized: contend with softening exports, which act as a drag on growth, even as they seek to contain inflation and asset bubbles.

### Guarding against spillovers
- Channels through which euro zone turmoil could affect Asia:
  - Foreign investors could withdraw abruptly (to some extent this is already happening, but things could get much worse).
  - Stressed European banks could withdraw funding from their local branches and cut back on cross-border lending.
  - Key derivatives markets—on which some local banks have become reliant—could be impaired.
- Potential consequence: impairment of dollar liquidity provision in Asian markets where European banks have been important providers.

### Policy recommendations and flexible response
- Recommended stance: policymakers should react flexibly to domestic challenges amid an unsettled external environment.
- Specific guidance:
  - In overheating economies where monetary conditions are still loose, policies should be geared towards returning inflation to the target range.
  - Policymakers should be willing to change direction quickly should downside risks materialize.
  - In economies where inflation is under control and global financial linkages are greater, a pause in monetary tightening is warranted.
- Comparative advantage noted: Asia’s fundamentals are good, and the scope for policy adjustments is much greater than in other regions of the world.

### Special considerations for low-income and Pacific Island economies
- Asian low-income and Pacific Island economies face similar challenges, but often in a more acute form.
- In low-income countries, the fight against inflation is complicated by strong second-round effects and less well anchored inflation expectations.
- Pacific Island economies need to undertake further structural reforms to lift their potential growth.

### Longer-term rebalancing
- Weak global demand highlights the benefit for Asia to rebalance growth towards domestic sources of demand.
- Rebalancing is acknowledged as a long-term process, but efforts should start immediately.
- Fiscal policy advice: re-prioritizing fiscal spending and directing public spending toward critical infrastructure investments.
  - Expected outcomes of such spending: support rebalancing and help foster more inclusive growth.

### Context about the publication
- Platform: IMFBlog, described as a forum for the views of IMF staff and officials on pressing economic and policy issues.
- Organizational note: The IMF, based in Washington D.C., is an organization of 191 countries, working to foster global monetary cooperation and financial stability around the world.
- Disclaimer: The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.

*Source: Dealing with Uncertain Economic Times: The Outlook for Asia — IMFBlog (Anoop Singh, October 13, 2011).*

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## Content in this bundle

- **iMFdirect 博客: 应对不确定的经济时期, 亚洲的前景, 2011 年10 月13 日**
  - [iMFdirect 博客: 应对不确定的经济时期, 亚洲的前景, 2011 年10 月13 日 (Markdown version)](/external/chinese/np/blog/2011/101311c.pdf.md){rel="alternate" type="text/markdown"}
  - [iMFdirect 博客: 应对不确定的经济时期, 亚洲的前景, 2011 年10 月13 日 (PDF)](/external/chinese/np/blog/2011/101311c.pdf){rel="external" type="application/pdf"}
- **経済が不確実な時代に対応する：アジアの見通し; アヌープ・シン; iMF direct ブログ 2011年10月13日掲載**
  - [経済が不確実な時代に対応する：アジアの見通し; アヌープ・シン; iMF direct ブログ 2011年10月13日掲載 (Markdown version)](/external/japanese/np/blog/2011/101311j.pdf.md){rel="alternate" type="text/markdown"}
  - [経済が不確実な時代に対応する：アジアの見通し; アヌープ・シン; iMF direct ブログ 2011年10月13日掲載 (PDF)](/external/japanese/np/blog/2011/101311j.pdf){rel="external" type="application/pdf"}

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## References

- [dangerous new phase](http://blogs.imf.org/2011/09/20/strong-policy-action-the-essence-of-restoring-global-economic-hope/)
- [IMF’s Managing Director stated recently](http://blogs.imf.org/2011/09/27/resolve-and-determination-how-we-get-out-of-this-together-2/)
- [Regional Economic Outlook for Asia and the Pacific](http://www.imf.org/external/pubs/ft/reo/2011/apd/eng/areo1011.htm)
- [rebalancing growth](http://blogs.imf.org/2011/04/29/rebalancing-growth-in-asia/)

_Source: https://www.imf.org/en/blogs/articles/2011/10/13/dealing-with-uncertain-economic-times-the-outlook-for-asia_