Events unfolding far from Asia's shores could shape the region's economic outlook for 2012, but Asia's policymakers have the room to respond aggressively to a worsening global economic outlook, the IMF said in a report.
“Despite the prevailing global uncertainty, Asia has until now, proven to be very resilient. It has boasted strong domestic demand, low unemployment, and factories working at near-full capacity. While credit growth has slowed from the torrid pace of early 2011, it remains robust in most economies," the global lender added.
However, the region's heavy dependence on trade and exports may make 2012 a tough year for the Asian economies, the IMF cautioned.
Tight monetary policy conditions in major Asian economies including China and India have led to weaker domestic demand, the lender said.
Strains in financial markets amid the deepening debt crises in Europe may also pose severe funding risks for Asian economies in the coming months.
"Further financial turmoil in the euro zone would likely have a substantial impact on Asia by reducing access to credit. Euro zone banks are an important source of funding for many Asian banking systems, and play a crucial role in providing trade credit," the IMF noted.
The IMF said that monetary easing and structural reforms would help in reducing the vulnerabilities of the Asian economies to prevailing external risks.
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