East Asia’s Growth Adds Risk of Asset Bubbles, World Bank Says

(Bloomberg) -- East Asian economies will grow faster than initially estimated this year, adding pressure on central banks to tighten policy and allow currency flexibility to prevent asset bubbles, the World Bank said. Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea, Singapore and the Indian subcontinent, will expand 6.7 percent this year, more than an April estimate of 5.3 percent, the Washington-based lender said its semi-annual report today. Growth may accelerate to 7.8 percent next year, it said.

Asian governments have pumped more than $950 billion into their economies after the global credit crunch cut demand for the region’s cars and flat-panel televisions. Australia has begun raising interest rates, while central banks including India’s and South Korea’s have signaled a readiness to raise borrowing costs in the coming months.

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