The International Monetary Fund (IMF) reports Asia will continue to lead global economic growth over the next two years even as the region grapples with risks including inflation, turmoil in the Middle East and the effects of Japan’s tsunami.

Robust growth will be driven by economic powerhouses China and India. The IMF forecasts China’s economy will grow 9.5 percent while India will expand about 8 percent over the next two years.

IMF warned however of ” overheating” across the region as consumer price inflation rose to 4.5 percent in February. Higher oil and food prices are starting to feed into broader inflation and will affect the poor, the fund said. Inflation is also being driven by low interest rates in many Asian countries.
The IMF forecasts inflation will continue rising this year before easing modestly in 2012.

Earlier this week, the Asian Development Bank warned that surging food prices threaten to push millions more people into poverty and shave up to 1.5 percentage points off regional economic growth.

The IMF said turmoil in the Middle East and North Africa could also pose a risk by causing further spikes in oil prices, which would shave economic growth in countries reliant on oil imports, such as China and Japan.

Asian economies could also be affected if higher oil prices result in a global slowdown, which would result in a drop in demand from wealthy countries for their exports.

The IMF cut its forecast for Japan’s economic growth in 2011 to 1.4 percent from 1.6 percent because of the March 11 earthquake, tsunami and subsequent nuclear disaster, which left about 27,000 people dead and missing and is estimated by the government to have caused up to $305 billion in damage.

Economic damage is much greater than from the 1995 Kobe earthquake, the IMF said. Power supply interruptions are affecting a much larger region, including the Kanto region around Tokyo, which accounts for about 40 percent of Japan’s economy.

Chan, Kelvin. "Asian economies continue to lead the world."
1 May 2011. The Manila Bulletin. Accessed 2 May 2011.
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