Too early to remove stimulus packages in Asia, says ADB

ADB president Haruhiko Kuroda

The head of the Asian Development Bank today said that it was too early for Asian countries to end stimulus policies started during the financial crisis last year. ADB president Haruhiko Kuroda added that he saw no big risk of price bubbles in China.

Largely echoing the Indian government's views, Kuroda said that policymakers still need to restore demand and stabilise financial systems to support the economic recovery.

China's surprise move on Tuesday to raise bank reserve requirements was "quite appropriate" even if there were no big asset price risk in the country's economy, he said. China surprised world financial markets by increasing - sooner than expected - the amount that banks must set aside as reserves. The move was apparently prompted by concerns over a surge in inflation surge.

"While we believe developing Asia (the developing countries in the region) is leading the global economic recovery, it is still too early to relax vigorous efforts to restore demand and stabilise financial systems," Kuroda told a forum on the crisis in Manila, the ADB headquarters.

He said the rebound in the world economy was fragile. Asia is leading the recovery, but growth is unlikely to lead to runaway inflation, he added.

"The timing of exit from policy stimulus needs to be tailored to countries' individual situations, taking into account inflation risks where output gaps are turning positive, as well as debt levels," Kuroda told reporters.