Seoul - The International Monetary Fund (IMF) on Thursday raised its growth forecast for Asia as the region was rebounding rapidly from the global crisis, but it said Asia must adopt to a "new world" with weaker demand from its key Western export markets. Asia's gross domestic product (GDP) growth was now projected to be 2.75 per cent in 2009 and 5.75 per cent in 2010, about 1.5 percentage points higher for both years than predicted in the IMF's regional outlook in May, said a IMF report on the economic outlook of Asia-Pacific released in Seoul.
However, as the recovery of the global economy was expected to be sluggish, Asia's growth forecast for 2010 was well below the average of 6.7 per cent growth posted over the past decade, said the report.
"The primary driver of Asia's recovery has been a return towards normalcy following the abrupt collapse in global trade and finance at the end of 2008," the report said.
"Just as the United States downturn triggered an outsized fall in Asia's GDP because international trade and finance froze, now their normalization is generating an outsized Asian upturn," it added.
The other main driver of Asia's rebound, the IMF said, had been the region's rapid, forceful, and comprehensive policy response to the global downturn.
"The response - both on the monetary and on the fiscal side - has been substantially stronger than in past recessions and in some respects greater than in other regions," according to the report.
One major challenge ahead for Asia's policy makers was to maintain policy stimulus until the recovery became self-sustaining, the IMF said.
The second challenge for the region would be to return to sustained, rapid growth in a "new world" with softer demand from the G7 industrialized nations.
"With the external environment likely to remain weak for some time, Asia's growth prospects may be determined by its ability to diversify drivers of growth to allow domestic sources to play a more dynamic role," said the report.
For the next two years, the IMF said, China was expected to continue leading Asia with growth projected to be 8.5 per cent in 2009 and 9 per cent in 2010, while India's growth was expected to reach 5.4 per cent this year and 6.5 per cent next year.
Asia's newly industrialized economies - Hong Kong, Singapore, South Korea and Taiwan - were all projected to contract in 2009, but expected to reach growth rates between 3.5 and 4.3 per cent, respectively, in 2010.
For Japan, the IMF report expected a GDP contraction of 5.4 per cent this year and a modest recovery with growth by 1.7 per cent for 2010.
