China and India’s economies slowed only slightly as the world entered recession last year and are now powering a global economic recovery, the International Monetary Fund (IMF) said Wednesday.
China’s economy is expected to grow at about 10 per cent both this year and in 2011. India will grow 8.8 per cent this year — revised upwards more than 1 percentage point from the IMF’s January forecast — and 8.4 per cent in 2011.
Emerging Asia’s recovery was broad—based and durable, fuelled both by a revival in exports and strong domestic demand, the IMF said in its World Economic Outlook, a semi—annual report on the global economy.
“Growth appears not only strong but sustainable,” IMF chief economist Olivier Blanchard said of the Asian developing economies.
That stands in sharp contrast to the industrial world. The United States, Europe and Japan are all predicted to have “sluggish” recoveries with high unemployment and dangerously high debt levels.
Japan’s economy is projected to grow 1.9 per cent in 2010.
Other developing Asian economies are also powering ahead.
Indonesia, which emerged from the global recession largely untouched, will grow 6 per cent in 2010 and 6.2 per cent the following year.
Thailand’s economy will grow by 5.5 per cent both years, the IMF said, while the Philippines will add 3.6 per cent this year and 4 per cent in 2011.
The strong growth rates have prompted the IMF to warn some of the region’s economies to guard against overheating. A sharp uptick in investment from abroad, if unchecked, could encourage the kinds of asset bubbles that fuelled the 2008 financial crisis in the wealthy world.
Foreign investments “are fundamentally good news,” said Mr. Blanchard.
“But we have learned from experience that they can also lead to booms and busts.” Mr. Blanchard warned that a major rebalancing of the global economy was still needed, with emerging powers boosting domestic demand as wealthy country consumers pull back. Stronger currencies in developing countries might help the process, he said.
China’s growth in the last year was partly fuelled by a massive injection of government funds into the economy, though the IMF said it expected private demand in the region to begin picking up as well.
Encouraging this shift in China’s economy from a reliance on exports to domestic demand would be “highly desirable,” and helped by an appreciation of the country’s currency, Mr. Blanchard said.
