Asia Faces New Risks of Overheating: Zoellick.
"Asia's rapid recovery from the economic crisis carries new risks of overheating, and governments must carefully unwind their huge stimulus injections, the head of the World Bank warned Wednesday.
Robert Zoellick said there were signs in some markets of a 'substantial' rise in equity and property prices that could lead to asset bubbles -- the very ingredients that triggered the global crisis in the first place...." [Agence France Presse]
Xinhua adds that, while "...speaking at an investment summit held on the sidelines of the 17th Asia-Pacific Economic Cooperation (APEC) Leaders' Week meetings, Zoellick said he is relatively "comfortable" with the growth prospects this year but anticipates risks to the global recovery next year...." [Xinhua]
"...Zoellick said that while he's relatively comfortable of growth prospects for the global economy in 2009, there were some risks heading into 2010, namely that of second and third order wave effects like higher consumer loan delinquency and rising unemployment, especially in the U.S.
But policy responses shouldn't only be through higher interest rates, Zoellick warned.
"The solutions for asset bubbles are not so easy to determine," he said.
"One of the areas that banking supervisors and central bankers may need to examine when you face asset bubbles is are there tools in the banking and supervisory systems to constrain some of the credit?..." [Market News International]
"...Mr Zoellick also warned that the world could no longer rely on US consumption to drive the world economy as it used to, as US consumers will likely be cutting back on demand even after the crisis...." [Channel News Asia]