THE International Monetary Fund (IMF) has warned that a renewed escalation in Europe's difficulties would clearly put the Asia and Pacific region's buoyant economic outlook at risk.
Releasing its regional outlook for the Asia and Pacific yesterday, the IMF said the key risk would be a sharp fall in exports to advanced economies and a reversal of foreign capital flows that would severely affect activity in the region.
There are also risks from the region's macroeconomic policies that have generally been accommodative, so that should there be a further stabilisation in global economic and financial conditions over the course of 2012, it could boost growth and revive inflationary pressures.
"Asian policymakers now face the challenging task of adjusting policies to support stable, non-inflationary growth," the IMF said, releasing the report in Kuala Lumpur.
The Washington-based institution expects regional growth of 6.0 per cent in 2012 and 6.5 per cent in 2013, only 0.1 per cent down for each year from its previous forecast in January.
However, there will be variations within the region this year, with emerging economies expanding at the fastest pace in the world, led by China and India growing about 8.25 per cent and close to seven per cent respectively.
The so-called industrial Asia - Australia, Japan and New Zealand - will grow at 2.2 per cent.
It forecasts Australian growth at 3.0 per cent in 2012, unchanged from its view in January, and 3.5 per cent in 2013, down 0.1 per cent from its previous projection.