Asia-Pacific recovery to continue: OECD

TOKYO

Capital is f lowing to emerging economies in the region because their growth prospects are better than those of major economies, leading some countries to intervene in the currency market or introduce capital controls, the OECD said in its twice-yearly outlook report.

A certain amount of appreciation in Asia-Pacific currencies would help correct economic imbalances and countries should refrain from currency intervention as it could encourage protectionism, the OECD said.

South Korea’s economy is predicted to grow 6.2 per cent this year, 4.3 per cent next year and 4.8 per cent in 2012 as increased competitiveness sustains export growth and falling unemployment underpins domestic demand, the OECD said.

Japan’s economy will grow 3.7 per cent this year, 1.7 per cent in 2011, but the expansion will slow further to 1.3 per cent in 2012 as exports moderate, it predicted. This would not be quick enough to bring an end to persistent deflation, so the Bank of Japan should implement more quantitative easing measures, the OECD said.

China, not an OECD member, is crucial to the Asia-Pacific region, because many countries rely on its demand for parts, finished goods and commodities. China’s economy will continue to expand as domestic consumption offsets more moderate export growth, but inflation and the potential for non-performing loans in the property sector are risks, the OECD said.

For the global economy, the OECD predicted a “soft spot” next year as government stimulus is withdrawn. The world economy will expand 4.6 per cent this year, 4.2 per cent next year but growth will rise again to 4.6 per cent in 2012, it forecast.