ECONOMIC RISKS IN ASIA

IMF FLAGS RISKS OF ASSET BUBBLES, MIDDLE INCOME TRAP IN ASIA

Kevin Lim

Reuters, April 29, 2013

SINGAPORE (Reuters) - Asia needs to guard against asset bubbles and its emerging economies must improve government institutions and liberalise rigid labour and product markets if they wish to reach the level of developed countries, the International Monetary Fund said on Monday.

"Emerging Asia is potentially susceptible to the 'middle-income trap,' a phenomenon whereby economies risk stagnation at middle-income levels and fail to graduate into the ranks of advanced economies," the IMF said in its latest Regional Economic Outlook for Asia and the Pacific.

"MIEs (middle-income economies) in Asia are less exposed to the risk of a sustained growth slowdown than MIEs in other regions. However, their relative performance is weaker on institutions," the international funding agency said.

IMF's warning about the emerging risks faced by Asian countries come at time when the region looks set to lead a global economic recovery as risks from a meltdown in Europe recede.

"While the external risk of severe economic fallout from an acute euro area crisis has diminished, regional risks are coming into clearer focus. These include some ongoing buildup of financial imbalances and rising asset prices," the IMF said

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