Asian nations must coordinate stimulus exit plans: ADB

TOKYO: Asian nations must coordinate their exits from economic stimulus to avoid attracting excessive speculative inflows of capital, the president of the Asian Development Bank warned Thursday.

Speaking in Tokyo, ADB president Haruhiko Kuroda warned that "robust growth in Asia suggests it will tighten monetary policy before other regions."

This means "higher yields and currency appreciation, which may encourage excessive capital inflows, which will require careful macro-economic management," he said.

Foreign investors have rushed back into emerging Asia, attracted by its swift recovery amid a renewed appetite for risk and very low returns on assets in developed economies, the ADB said in a report this week.

Driven by strong growth in regional giants China and India, emerging Asia "is leading the recovery with GDP growth expected to be 8.3 percent this year," Kuroda said.

"Obviously, well-designed and well-timed stimulus exit strategies are crucial. Central banks and finance ministries should collaborate to avoid 'doing too little too late,' or 'too much, too soon.'"

China's growth, which the ADB forecasts at 9.6 percent this year, will continue to drive the region, he said, but the Asian giant "may find it difficult to control overheating".

Beijing is battling to control an explosion in new lending that began last year and has raised fears of inflation, economic overheating and a possible rash of bad loans.

"Where recovery is strong and inflational pressures are emerging, as in China and India, for example, it is time to begin normalising macro-economic policies," said Kuroda.

"Where recovery is fragile, accommodative monetary and fiscal policy should remain."