IMF Warns Asian Economies Of Overheat Risk

The International Monetary Fund has warned about massive capital flows into Asia and urged the region's leaders to guard against overheating economies.

The IMF said it was "carefully" monitoring the situation across a range of countries.

The level of the inflows - which have sent Asian stocks and property prices skyrocketing - are close to or above historical trends in most economies including those in Southeast Asia, the IMF said.

"We are seeing financial pressures - you may call them imbalances, or the risk of imbalances - rising," IMF Asia and Pacific department director Anoop Singh said.

"And because these can worsen quickly, they certainly are being monitored very carefully.

"Therefore the challenge policy-makers face is how to guard against the potential build-up of national imbalances while continuing to deliver appropriate support for growth."

Indonesia's capital Jakarta has boomed with its greatest growth in 15 years

The IMF's warning comes as it launched a regional economic outlook, which maintained projections that they will grow by 5.7% this year.

"Our basic point is that national stability concerns in Asia are generally rising and ... are close to, or above trend in most economies, including in the Asean (Association of Southeast Asian Nations) region," he said.

"And therefore monetary policy-makers need to be ready to spot early and decisively to emerging risks of overheating."

The IMF did not name any economy at risk of overheating, but stock markets in Indonesia, the Philippines and Thailand have recently seen steep increases.

Property prices in economies like Hong Kong and Singapore have also been climbing steeply, prompting the governments to introduce cooling measures.

Thailand suffered heavily in the last mass capital outflow, in the 1990s

In its report the IMF said the inflows have generally "not been excessive so far" but could could reach levels difficult to manage.

Large flows of funds from industrialised economies into the region where they can get higher returns, and easy domestic credit due to low interest rates, have pushed asset prices sharply higher.

The warning comes as memories of the great capital outflow from Asia dim.

Thailand, Indonesia and other Asian countries suffered dramatic capital withdrawals in the late 1990s as foreign investors hurriedly sought new havens for funds.

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