Economic Performance in the First Half of 2007
? Economic growth in emerging East Asia was stronger than expected in the first half of 2007, buoyed by strong consumption and external demand.
? Inflation continued to fall in most ASEAN economies, but started to rise in PRC, Korea, and Singapore.
? Throughout the region, current account surpluses were sustained in the first half of 2007, while capital inflows remained strong.
? Financial markets gained across the region in the first half of the year despite some volatility, with several policy makers increasingly anxious about the risk of a possible equity market bubble.
? Monetary policy responses varied across emerging East Asia?with PRC; Korea; and Taipei,China tightening policy, Malaysia keeping policy rates unchanged, while policy rates in Indonesia, Philippines, and Thailand were lowered.
? Against a background of favorable economic conditions, financial sectors in the region have generally remained resilient, although signs of stress related to sharply higher asset prices and higher volatility in several markets are emerging.
Outlook, Risks, and Policy Issues
? The overall external environment for emerging East Asia remains generally supportive for 2007, with easing yet solid global growth and more volatile yet favorable financial conditions.
? Continued strong growth momentum in the PRC coupled with slightly moderating expansions in the NIEs and most ASEAN economies should lead to a slightly slower yet robust growth in emerging East Asia this year and in 2008.
? Notwithstanding the solid growth outlook, several risks remain: (i) greater than expected inflation; (ii) increased financial market volatility; (iii) a sharper US economic slowdown; (iv) a disorderly adjustment of global ...