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IMF: Economic Cycle in Asia to Experience More Weakness Ahead

The International Monetary Fund (IMF) said in its semiannual World Economic Outlook report released on Wednesday that the economic cycle in Asia is expected to experience more weakness ahead as a result of slowing demand and the ongoing financial market crisis.

"The economic cycle in emerging Asia started to turn in early 2008, and more weakness is expected ahead in response to slowing demand from advanced economies and growing strains in regional financial markets," the IMF said in the report.

At the same time, the IMF said that weakening external demand is likely to weigh on exports of emerging Asia, but, in some cases, the impact may be mitigated by still-loose macroeconomic policies and currency depreciation.

Investment will also be moderate, mainly because of deteriorating export prospects.

And consumption will ease because of still-high fuel and food prices, although subsidies, which are common in the region, may cushion the impact on purchasing power.

"The risks to the outlook are firmly to the downside," the IMF said.

It said that the main concern is that a buildup of stress in the global financial system and a sharper-than-anticipated global slowdown could further weigh on activity.

On the upside, domestic demand may prove more resilient, with falling commodity prices providing a boost to real incomes, said the IMF.

In the report, the IMF also said that economic growth in China is expected to slow to 9.7 percent in 2008 and 9.3 percent in 2009 from last year's pace of 11.9 percent.

It said that growth in China eased in the first half of 2008, partly because of slowing exports.

But "activity continues to be supported by steady investment growth and accelerating consumption."

About inflation, the IMF said that headline inflation in China has steadily declined since its 8.5 percent peak in April, as food supply conditions have normalized.

The semiannual World Economic Outlook report came a few days before the annual meeting of the IMF and its sister institution World Bank in Washington on October 13.

(Xinhua News Agency October 9, 2008)

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- IMF Cuts Chinese Economic Growth Forecasts to About 9%
- Growth in Asia to Fall to 6.2% in 2008: IMF

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