Asia will weather effect of Fed Tapering - ADB President

By Rizza Sta. Ana

Dec 27, 2013 01:52 PM EST

According to Asian Development Bank President Takehiko Nakao, emerging Asian economies will be able to weather the impact of the US Federal Reserve's move to cut its $85 billion monthly bond purchases, and also predicted a 6% growth this year and the succeeding one.

In an interview at the ADB's Tokyo office yesterday, Nakao, who is also a former Japanese vice-finance minister, said, "I would like to give a more sanguine view (about the impact of tapering of Federal Reserve asset purchases.) The market has already incorporated elements of the tapering-off to some extent and there was a certain overreaction on the side of the market."

Nakao also added that the increasing strength of Japanese and US economies will also help emerging Asian nations next year. At the same time, he said that policy makers in Asia should take advantage to address policy needs during the stability period.

Nakao added, "The risk is that the market is not convinced about the stability of the economies so the policy makers should be mindful that their policies should be very strong. (For example, Indonesia and India should take care of their fiscal deficits, and Indonesia) must pursue needed structural reforms, especially liberalization of the retail market and financial market."

Earlier in December, the Fed said it will be shearing its monthly bond purchases to $75 billion, which was widely seen as its first step to unwind its unprecedented stimulus program. After May 22, when Fed Chairman Ben S. Bernanke said the agency could withdraw its economic stimulus for the first time, emerging-market stocks had plunged, but quickly rebounded after in September, the US agency said it will be keeping its quantitative-easing program.

ADB's 2014 growth forecast for China was raised from 7.4% early this month to 7.5%, but has reduced its Southeast Asia forecast from 5.3% to 5.2%, said a Bloomberg report. Moreover, ADB retained its forecasts for developing Asia, which said it will grow 6% this year and 6.2% in 2014.

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