## Press Release: Asia Remains World’s Most Dynamic Region, Although Pockets of Overheating Pose Risks

_IMF News, April 28, 2011_

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## Bibliographic details
- Published: April 28, 2011

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### Growth outlook
- Economic growth in the Asia and Pacific region is expected to remain robust this year and next.
- Growth is expected to be close to 7 percent in 2011 and 2012, as the region continues to lead the global recovery.
- Output gap is closing in much of emerging Asia, where growth is expected to reach around 8 percent, led by China and India.
- For Hong Kong SAR, growth in 2011 is expected to be close to 5.5 percent.
- Both exports and domestic demand are fueling rapid economic growth in the region.

### Shocks and spillovers
- The earthquake-related tragedy in Japan in mid-March caused terrible losses of life and property.
- The government’s response helped to contain the economic impact, and spillovers to activity in the rest of Asia should be limited.
- The situation is, however, still uncertain.
- New downside risks include unrest in the Middle East and North Africa and uncertainties about the effects of the tragedy in Japan.
- Fiscal and financial vulnerabilities in advanced economies could affect Asia mainly through the trade channel.

### Inflation and overheating risks
- For the region as a whole, CPI inflation accelerated to about 4.5 percent in February 2011, largely due to the rise of fuel and food prices.
- Fuel and food price increases are beginning to feed into core inflation and to affect the poor.
- Headline inflation is generally expected to increase further in 2011, before decelerating modestly in 2012.
- Signs of overheating are building up in some of the region’s asset markets.
- Example: In Hong Kong SAR there is the risk of a property bubble developing; the government is taking proactive policy steps, such as putting in place a range of prudential measures.

### Policy recommendations and priorities
- The need to tighten macroeconomic stances in Asia has become more pressing than it was last year.
- Further monetary tightening and macro-prudential measures will be necessary in several economies that face growing overheating pressures in order to:
  - contain credit dynamics;
  - bring interest rates more closely in line with robust growth;
  - mitigate risks to the financial sector.
- “In many economies, exchange rate flexibility is a key line of defense against overheating.”
- Several economies have scope for more fiscal consolidation, which would:
  - help contain demand;
  - build the fiscal space that would allow governments to respond more effectively to future shocks.

### Medium-term structural challenges
- A key challenge for Asia’s policymakers is to achieve balanced, sustainable, and more inclusive growth over the medium term.
- Need to reduce inequality through inclusive labor markets to guard against risks to social stability.
- Need to develop new engines of growth by strengthening private domestic demand.

*IMF press release, April 28, 2011.*

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## References

- [People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)
- [People's Republic of China - Hong Kong Special Administrative Region and the IMF](http://www.imf.org/external/country/HKG/index.htm)
- [Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [https://www.imf.org/external/pubs/ft/reo/2011/APD/eng/areo0411.htm](https://www.imf.org/external/pubs/ft/reo/2011/APD/eng/areo0411.htm)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr11150_