Surging East Asian Capital Inflows a Big Concern, Says ADB Report.

M2 PRESSWIRE-27 July 2007-Asian Development Bank: Surging East Asian Capital Inflows a Big Concern, Says ADB Report(C)1994-2007 M2 COMMUNICATIONS LTD

RDATE:27072007

HONG KONG, CHINA - Continued strong growth in the People's Republic of China and only slightly moderating expansions in the newly industrialized economies and most of ASEAN should lead emerging East Asia to robust 8.1% GDP growth in 2007 and 7.9% in 2008, says a new report issued by the Asian Development Bank (ADB).

As the region steams along, however, surging capital inflows--which reached a record $269 billion in 2006--brought with them increasing pressures for currency appreciation and fast-rising asset prices, leaving authorities with a new set of macroeconomic challenges to manage, says the July issue of the Asia Economic Monitor.

"Already this year the Thai baht (offshore) is up over 17.6% and the Philippines peso over 9%, while equity markets have been rising fast and showing increasing signs of volatility," says Jong-Wha Lee, Head of ADB's Office of Regional Economic Integration (OREI).

"Authorities in the region are faced with a serious challenge as they look for the right policy choices to manage these capital flows and keep the economic expansion on a steady course," he says.

The danger of capital inflows, although they can also benefit an economy, lies in the potential for a sudden reversal, with huge implications for asset prices and overall macroeconomic conditions.