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IMF lauds major emerging economies

The IMF says major emerging Asian economies such as India, China and Indonesia are leading the global economic recovery.

twitter-logo PTI   Washington     Last Updated: September 11, 2010  | 19:09 IST

Major emerging Asian economies such as India, China and Indonesia are leading the global economic recovery, the International Monetary Fund has said.

"Activity in emerging economies has been sustained by strong domestic demand and the recovery of global trade. Major economies in emerging Asia - China, India, and Indonesia - remain in the lead, followed by Brazil in Latin America," IMF said in a report to the Group 20 countries on global economic prospects.

"In both regions, fixed investment has begun accelerating beyond its 2009 momentum despite less stimulative policies, suggestive of an increasingly self-sustaining recovery," it said.

More recently, retail sales and manufacturing activity have begun to moderate from the very elevated levels earlier in the year, the IMF said.

The recovery remains notably more subdued in parts of emerging Europe and the Commonwealth of Independent States, it said.

Talking about inflation, the report said it will remain generally subdued, except in some emerging economies.

In advanced economies, continued excess capacity and high unemployment will keep inflationary pressures muted. With core inflation slowing to less than 1 per cent and considerable economic slack, deflation will be the more pertinent risk.

In emerging economies, inflation in 2010 is projected at nearly 6 per cent. With commodity prices expected to stabilise, headline inflation is expected to subside to 5 per cent in 2011.

"However, inflationary pressures will be more elevated in economies that have had less stable inflation in the past or, such as for example, India, are operating closer to capacity," IMF said.

According to the report, monetary policy has remained highly accommodative in many economies.

The IMF said fast-growing advanced and emerging economies can, and have in part, already started tightening policies.

"In economies with excessive external surpluses and relatively low public debt, which are principally those in Asia, monetary tightening and exchange rate adjustment should be the first responders to address demand pressures; withdrawal of fiscal stimulus can wait," it said.

In other emerging economies where public debt is relatively high and external positions broadly in line with medium-term fundamentals, fiscal tightening can start immediately since the recovery is well underway," it said.

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