ADB chief sees Asia weathering Fed's taper
Stronger US and Japanwill help the region achieve 6pc growth, Takehiko Nakao says
Asian Development Bank president Takehiko Nakao is confident emerging Asian economies will weather the impact of reduced United States monetary stimulus, predicting growth of about 6 per cent this year and next.
"I would like to give a more sanguine view" about the impact of tapering of Federal Reserve asset purchases, Nakao, a former Japanese vice-finance minister, said in an interview at the ADB's Tokyo office. "The market has already incorporated elements of the tapering-off to some extent and there was a certain overreaction on the side of the market."
Strengthening US and Japanese economies should help emerging Asian nations next year, Nakao said. At the same time, it was important that policymakers in the region used the period of stability to address domestic policy needs, he said.
The US Federal Reserve said earlier this month it was trimming its monthly bond purchases to US$75 billion from US$85 billion, taking the first step towards unwinding its stimulus programme. Emerging-market stocks plunged after May 22, when Fed chairman Ben Bernanke said for the first time it could withdraw stimulus, and then rebounded after the Fed decided in September to maintain its quantitative-easing programme.
Nakao also indicated that diplomatic tensions between Japan and China were not yet at a level that would require altering the ADB's economic projections. Thailand's political unrest left it risking lost opportunities in attracting investment from abroad, with many other options now in Southeast Asia, Nakao said.
The ADB raised its 2014 growth forecast for China to 7.5 per cent from 7.4 per cent earlier this month while cutting its forecast for Southeast Asia to 5.2 per cent from 5.3 per cent. It maintained its forecasts for developing Asia to grow 6 per cent this year and 6.2 per cent next year.
The ADB chief, who took office in April, said he was broadening the Manila-based lender's agenda beyond a focus on the provision of credit. The bank is increasingly organising the sharing of policy expertise among its members, in areas from grappling with climate change to managing urbanisation.
He said the ADB was working "at a very high level" with Chinese officials to support their new five-year plan, in fields from water management and solar energy to reforming the fiscal relationship between China's regions and its central government.
On Japan, Nakao said there had been "strong signs" the Bank of Japan's policies were working, adding that he was more optimistic deflation would end.