Asian nations will need a recovery in the global economy before the region can exit a slowdown as its trade and financial linkages have increased with the rest of the world, International Monetary Fund Managing Director Dominique Strauss-Kahn said.

Most Asian economies have room to boost their fiscal stimulus packages to spur growth, Strauss-Kahn said in an online press briefing in Washington. The region needs higher domestic consumption to be less vulnerable to export demand, and the shift can be done through more public spending, he said.
“Asian economies cannot recover alone without the rest of the world,” Strauss-Kahn said. “A rapid recovery in Asia once the world economy regains its footing is possible.”
Governments around the region from China to Singapore and India have pledged more than $685 billion in fiscal stimulus and injected billions more into their financial systems to spur lending as the global recession worsens.
Developing Asia will probably expand 5.5 percent this year, the slowest pace since 1998, the IMF said in an update of its World Economic Outlook report last week. The region may expand 6.9 percent next year, the fund forecasts.
“There are some grounds for optimism in Asia,” Strauss- Kahn said. “Asia has improved fundamentals over the last decade and there is considerable room for a counter-cyclical response.”
The IMF now expects China to expand 6.7 percent in 2009, lower than its 8.5 percent forecast in November.
‘Tall order’
Chinese Premier Wen Jiabao on Jan. 28 said meeting the government’s 8 percent growth target will be a “tall order.” That expansion target will be “very challenging” to achieve, Strauss-Kahn said on Tuesday.
U.S. Treasury Secretary Timothy Geithner on Jan. 22 said President Barack Obama believes China is “manipulating its currency,” suggesting the new administration may take a tougher line with its trading partner’s exchange-rate management.
China’s commerce ministry said Jan. 24 that the country hasn’t manipulated its currency to promote exports.
China’s yuan remains “undervalued,” Strauss-Kahn said on Tuesday, adding that ensuring growth in the world’s third-largest economy is a bigger priority than the level of the currency.
The yuan “would be the main problem if we were in a quiet period,” Strauss-Kahn said. “We’re not in quiet times, so we’d better concentrate today on recovery, keeping in mind it is true to say the renminbi is still undervalued.”
(Source: Bloomberg)