BRICS leaders in Sanya calls for regulations to curb volatile commodity prices

Anoop Singh, director of the International Monetary Fund's Asia-Pacific Department, said power losses in Japan after the nation's earthquake and tsunami threaten to disrupt growth in the region's emerging economies.

The IMF forecast for growth of about 8 percent in emerging Asian economies this year would be imperiled by more outages in Japan, where damage to the Fukushima Dai-Ichi nuclear power plant has prompted consideration of energy constraints, he said.

"The risks are clearly on the downside," Singh said at a news conference in Washington today. "There are uncertainties about power outages that could disrupt production in the supply chain."

Japan may impose legal limits to electric power use as policy makers prepare for shortages that are likely to worsen as the summer approaches, the government of Asia's largest advanced economy said last week. "Sizeable" reconstruction spending should help spur a rebound in growth, Singh said.

In China, the world's fastest-growing major economy, inflation "should peak shortly and will come down later this year," he said. China's economy will grow about 9.5 percent this year, and India's will expand approximately 8 percent, Singh said.

First Quarter
China's economy grew a more-than-estimated 9.7 percent in the first quarter and inflation accelerated in March to the fastest pace since 2008, the country's statistics bureau said yesterday, adding pressure for more monetary tightening. The central bank may boost reserve requirements for lenders "imminently" to drain cash from the economy, Credit Agricole CIB and Australia & New Zealand Banking Group said.

"Bringing inflation under control is their top priority," Singh said. "Policies are targeting this. This is clearly recognized by state leaders. We can be sure the measures that they have taken so far, these will be increased until we are certain inflation is coming down."

Inflation pressures across Asia were highlighted by India reporting a larger-than-forecast 8.98 percent jump in the wholesale-price index in March from a year earlier. The leaders of Brazil, Russia, India, China and South Africa, meeting in Sanya, China, this week said that volatile commodity prices pose a threat to the global economy, calling for more regulation.

While higher food prices are a risk for the Indian economy, investment inflows are less of a concern than in other nations, Singh said. Indian Finance Minister Pranab Mukherjee raised the cap on foreign ownership of corporate infrastructure bonds five- fold to $25 billion on Feb. 28 to promote investment in power networks and transport facilities. Inadequate infrastructure in those areas may cost Indian 1.1 percentage points of growth by 2017, according to McKinsey & Co.

"There's certainly much more room for capital flows in India to be supportive of greater infrastructure spending," Singh said. "We are quite optimistic on India's growth rate."