Asia Development Bank (ADB) Also Warns for Asset Bubble in Asia
Similar to the International Monetary Fund (IMF), the Asia Development Bank has warned that Asia can become hit by an asset bubble as central banks are loosening monetary policy. Besides Japan's program to inject USD $1.4 trillion into the domestic economy, America's Federal Reserve and United Kingdom's Bank of England will increase their money supplies to spur economic growth. These measures can result in economic overheating as well as asset bubbles across the Asian region.
Managing director of the ADB, Rajat Nag, stated that inflationary pressures are already emerging in most countries in Asia as economies reach full manufacturing capacity.
Last week, the IMF warned that the enormous influx of foreign capital (that has happened in recent years and is most likely to continue in the near future) can result in new bubbles due to excessive growth in lending and property prices. Despite these concerns, the IMF expects Asia to grow 5.75 percent in 2013 and regards Asia as the leader of global economic recovery, followed by the US and, lastly, Europe.
Indonesia's economy is expected to growth around six percent this year. Core inflation currently stands at 4.12 percent (YoY), which is still within the Central Bank's target range of 4.5 percent ± 1 percent. However, in June the Indonesian government plans to raise the price of subsidized fuel. This step is expected to increase the country's inflation figure. Indonesia's Central Bank's benchmark interest rate (BI Rate) has been at 5.75 percent since February 2012.