Istanbul - The International Monetary Fund (IMF) sharply raised its growth forecast for China on Thursday as part of what it called a "remarkable" turnaround by emerging Asian nations that are driving a global economic recovery. China's economy will grow by 8.5 per cent this year and 9 per cent in 2010, according to figures in the IMF's semi-annual World Economic Outlook. In July, the IMF predicted growth of 7.5 per cent this year and 8.5 per cent in 2010.
India has also been far less afflicted by the global recession and is projected to grow 5.4 per cent in 2009 and 6.4 per cent the following year. South East Asian countries, which rely on exports and were more severely affected by the recession, will rebound to growth rates of 4 per cent in 2010.
Japan's economy will also recover in 2010, growing 1.7 per cent in 2010 after a massive contraction of 5.4 per cent this year.
"Asia is at the forefront of the recovery," said Krishna Srinivasan, an economist with the IMF. Asia "will emerge both stronger and first" from the world's worst recession in decades.
The region's quick rebound has surprised economists, who expected Asia's dependence on exports to wealthier countries would push growth down further and for a longer period.
The IMF said the world economy will shrink 1.1 per cent this year before growing 3.1 per cent in 2010 - up from a July forecast of 2.5 per cent for 2010. Exports from Asia have plunged some 30 per cent since last year as a result of the downturn.
But the government response to the crisis has been massive, the result of huge reserves built up by Asian governments since the region's own economic crisis in the late 1990s. Stimulus measures in 2009 and 2010 will total nearly 5 per cent of economic output in China and Japan.
The IMF said public spending, together with stronger-than-expected demand within the region, has kept Asian economies growing strong. Yet the region's recovery is still fragile.
The IMF warned that Asia could no longer count on a quick rebound in exports to the United States and Europe, where any recovery is expected to be slow over the coming years. It echoed a call from leaders of the Group of 20 (G20) nations last week for more "balanced" global growth in the coming years.
"Many Asian economies therefore need to shift their composition of growth to be more focused on domestic demand," the IMF said.
The IMF also said China and others must avoid the pitfalls of an over-heated economy that is fuelled by a sharp increase in lending. It warned China against encouraging the kind of asset bubbles that led the United States and Europe into crisis last year.
