Strong Chinese, Indian growth easing: OECD

Friday, 19 November 2010 02:18 -     - {{hitsCtrl.values.hits}}

PARIS, (AFP) -Emerging Asian giants China and India are set for further high growth, with South Korea also set to expand at a brisk pace, but Japan’s economy to slow significantly, the OECD said on Thursday.

With a realignment of global trade balances and currencies top on the agenda of world leaders, the OECD also advised China that an appreciation of the yuan would also help stabilise its economy.

“The stability of the domestic economy would be enhanced if exchange rate policy were more oriented to allowing an appreciation against a basket of currencies,” the Organisation for Economic Cooperation and Development said in its six-month review of the global economic outlook.

The United States and others have contended that China has been kept its currency artificially low against the dollar to boost exports, a charge that Beijing denies.

Beijing has recently shown more concern about inflation, which a feared flood of US stimulus funds to emerging markets could exacerbate, but the OECD forecast Chinese consumer price inflation should stabilise at about 3.0 percent.

Despite the removal of stimulus measures, the Chinese economy is forecast to show growth of 10.7 percent this year and then slowing to 9.7 percent in the next two years as domestic demand increasingly fuels expansion.

In Asia’s other major emerging economy, India, growth should rebound to 9.1 percent this year, slow to 8.2 percent next year and then climb to 8.5 percent in 2012.

“...activity has eased form its unusually strong pace and there are now signs that the economy is shifting from the recovery phase to one of sustained high growth,” the report said.

Although the pace of the recovery in South Korea, a member of the OECD club of industrialised nations, has eased slightly in the second half of this year the country is still in line to post 6.2-percent growth this year.

Encouraging Seoul to raise interest rates to contain inflationary pressures and undertake structural reforms to underpin growth, the OECD forecast that South Korea’s economy will expand by 4.3 percent next year, and by 4.8 percent in 2012.

Japan had now ended its fiscal stimulus measures, but the effect of these should help its economy to grow by 3.7 percent this year. The pace of expansion should slow to 1.7 percent next year and 1.3 percent in 2012.

The OECD said that since it expected Japanese public debt to exceed 200 percent of output next year, the government should keep tight controls on spending.

“At a minimum, it is necessary to avoid additional fiscal stimulus and contain government spending in 2011-2012...” the OECD said.

Fuelled by a mining boom, Australia’s economic growth should continue to pick up pace over the next two years, expanding 3.3 percent this year, then 3.6 percent in 2011 and 4.0 percent in 2012.

China and India are not members of the OECD, a policy and research body for the governments of 33 leading economies in the world, but it habitually reviews the outlook for significant non-OECD areas such as the increasingly important top emerging economies.