Asia Can Withstand Europe Shocks: World Bank

Most Asian nations have room to use fiscal stimulus to protect their economies from an escalation in the European debt crisis that may have “substantial” spillovers in the region, the World Bank said. Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea, Singapore and India, will expand 7.8 percent in 2012 after growing 8.2 percent this year, the World Bank said in the semi-annual East Asia and Pacific Economic Update report today. Asian policy makers have shifted their focus to shielding growth, rather than stemming inflation, as Europe’s debt woes and a struggling U.S. economy increase the risk of another global recession. Australia and Indonesia have cut interest rates this month, while the Philippines in October unveiled a fiscal stimulus package to spur the economy. While new capital rules being introduced in Europe will constrain the ability of the region’s banks to lend in Asia, high reserves and current account surpluses in most East Asian countries will protect them from the impact of possible renewed financial stress, the World Bank said.