Asian economies from China to India will grow faster than expected through next year, far outpacing recoveries in the West, thanks to aggressive government stimulus spending and a pickup in global trade, the IMF said last week. But the region's rapid expansion will remain below the levels seen in the decade before the economic crisis. "Asia has not decoupled from the rest of the world," the IMF said. "In fact, Asia's fortunes remain closely tied to that of the global economy." Growth in Asia including Japan, Australia and New Zealand will probably accelerate to 5.8 percent next year from 2.8 percent this year, "well below" the 6.8 percent average over the past decade, the IMF said in its Economic Outlook for the Asia and Pacific Region, as cited by Bloomberg. IMF forecasts China will lead the region, expanding 8.5 percent this year and 9 percent in 2010. India's gross domestic product will gain 5.4 percent and 6.5 percent respectively, the report said.
The price of gold has touched an all-time high after a large sale of the precious commodity by the IMF to India. Gold struck a high of USD 1,095.05 an ounce in London, against USD 1,084.50 late in New York on Nov. 3. Buyers moved in after the IMF decision to sell 200 tonnes of gold to India's central bank. Gold and other commodity prices have surged recently as investors have moved away from the US dollar. The sale to India was nearly half the 403.3 tonnes of gold the IMF has targeted for sale over the coming years.
The IMF is not in principle opposed to emerging markets using capital controls to limit inflows of hot money that risk fuelling new asset price bubbles, Dominique Strauss-Kahn said, as cited by the Financial Times (UK). "I have no ideology on this," the IMF managing director said. He said capital controls were "not something that comes from hell" but said the fund would not recommend them as a standard prescription either - as they carried costs and were usually ineffective. His comments come as investors ponder whether other emerging nations will follow Brazil, which last month imposed a 2 per cent tax on short-term capital inflows in an effort to avoid bubbles and ease upward pressure on its currency. Many emerging market policymakers fear that surging capital inflows from foreign investors eager to capitalize on growth could bid asset prices up to unsustainable levels before abruptly reversing and triggering a bust. The IMF had moved away from blanket opposition to capital controls even before the crisis.
A new law to boost minimum wages and pensions by 20 percent in Ukraine is a threat to the crisis-stricken country's economic stability, IMF Managing Director Dominique Strauss-Kahn said last week. "We are concerned about the implementation of the law," Strauss-Kahn said. The new Ukrainian law, signed by Ukrainian President Viktor Yushchenko, could derail the loan arrangement between Ukraine and the IMF and jeopardize arrangements the country has made to receive a loan from the European Commission. Strauss-Kahn said the IMF would continue working with authorities "in the hope that they come together to reach a position that will allow early completion of the review," Reuters reported.