Emerging Asia urged to end stimulus measures amid recovery

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The Asian Development Bank (ADB) on Tuesday urged emerging East Asian economies to unwind stimulus measures launched during the global recession.

The Manila-based lender upgraded its 2010 growth forecast for emerging East Asia, including Southeast Asia, China and South Korea, to 8.1 percent from the 7.7 percent projected in April. The forecast for the region's economic growth in 2011 remains unchanged at 7.2 percent.

"While most emerging East Asian economies are assured of a sharp V-shaped recovery this year, it is too early to say that the "˜V' stands for victory," Srinivasa Madhur, Senior Director of ADB's Office of Regional Economic Integration, said in a statement. 

"Ensuring the sustainability of the recovery depends heavily on the timing, policy, and pace at which economic stimulus is withdrawn. The private sector must be strong enough to take over," he said.

In some economies such as South Korea, Malaysia and Singapore, tightening has already begun and should continue at what appears to be an appropriate pace, the bank said. It said unwinding policy stimulus may need to start soon in Indonesia, Philippines and Vietnam

"It's critical for each country to withdraw the stimulus at an appropriate pace but greater regional coordination, especially on exchange rates, could spur regional demand and help global economic rebalancing," said Madhur.

Growth in the first half of 2010 indicates Vietnam is on track to reach its targeted 6.5 percent growth for the year, according to the July edition of the bank's Asia Economic Monitor. The economy grew 6.4 percent in the second quarter of 2010, up from 5.8 percent in the first quarter.

Vietnam's fiscal deficit, the highest in the region, is expected to fall from 11.8 percent of GDP in 2009 to 8.3 percent this year, ADB said.

But while most other emerging East Asian economies added significantly to their foreign exchange reserves, Vietnam's low levels of reserves continued to fall, the bank said, noting that the estimate in December 2009 of a 2.5 month import cover is "a cause for concern."

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