IMF warns of excessive capital inflow in Asian economies

IMF warns of excessive capital inflow in Asian economies

International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn addresses the Asian Financial Forum in Hong Kong on Wednesday. AP

IMF Managing Director Dominique Strauss-Kahn said on the sidelines of the two-day Asian Financial Forum in Hong Kong that the reverse flow of "hot money" could cause trouble to the recovering economies.

"There is a danger in having too big capital inflows coming to some countries and sometime for some reasons, this capital inflow have a sudden stop and this create difficulties," Strauss-Kahn said.

He predicted the world economy will grow by 3 percent in 2010 while Asia, excluding Japan, can expect 7 percent growth.

"In advanced economies, most of the growth comes from public support and private demand is still very weak," the IMF leader said.

Regarding polices that have been put in place to fight against the crisis such as fiscal stimulus, he said finding the right time to implement exit policies is very difficult.
Exiting too late would waste resources, but "if you exit too early, you have a risk of a double-dip" he said, referring to a second recession.

On China's currency, Strauss-Kahn said the yuan is unlikely to appreciate in the short term, but pressure will build up when private consumers becomes the driver of China's economy.

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