East Asian economies should increase spending on infrastructures, cut taxes and ease monetary policies to cushion the impact of the global economic crisis, said a report issued on Friday.

Short-term fiscal policies should be designed to support long- term goals, said the Asian Policy Forum in its latest report, adding that this is why it is important to raise public spending on infrastructure, especially in fast-growing economies such as China and India.

Such a measure will support domestic demand and keep these economies afloat, it said.

The Asian Policy Forum is a region-wide collaboration of prestigious Asian research firms and regularly produces policy recommendations on various development issues. Its members include the Chinese Academy of Social Sciences, the Asian Development Bank Institute, Thailand Development Research Institute, and the Philippine Institute for Development Studies.

"Infrastructure investment with broad-based benefits such as rural transport and communication facilities, and mass housing needs to be given preferential attention," the report said.

Other fiscal measures that can be implemented immediately include tax cuts for individuals and corporations to support consumer spending and increased cash transfers for vulnerable sectors.

The waning consumption amid slower growth has eased inflation levels in the region. The Asian Development Bank forecast inflation in East Asia to slowdown to 6.9 percent this year.

The easing of inflation levels will give most central banks enough space to reduce interest rates and reserve requirements to boost credit and support growth in the region.

"Central banks also need to take strong steps to support liquidity in both domestic and U.S. dollar markets, including using lender of last resort facilities, expanding the types of assets the central bank can purchase, and promoting bilateral currency cooperation measures," said the report.

In the long term, East Asian economies can survive the global economic crisis through regional integration and cooperation, the report said.

The region can accelerate infrastructure development through a creation of an Asia Infrastructure Investment Fund, which can help developing economies avail of low-cost funding to build infrastructures, the report said.

East Asian governments should also reform both domestic and regional financial markets to boost savings and attract foreign investment, it added.

The report noted that it was the weaknesses in regulation and supervision that led to a credit crunch in the United States and Western Europe, which explains why it's important for East Asian monetary officials to improve regulatory oversight of domestic and cross-border financial systems.

"East Asian economies should consider consolidating various financial regulatory agencies. This would make it easier to gain an overall and consistent picture of financial developments in their markets," it added.

(Xinhua News Agency March 20, 2009)