World Bank warns on growth, inflation risks for Asia

China’s growth next year could be hit by credit strains and east Asian economies face the risk of inflation if they hold interest rates low, World Bank chief Robert Zoellick warned on Friday.

China “is going to face a challenge… because their credit growth has been very large and they’re starting to bring that back and that could have a potential effect on their growth later in 2010,” he told reporters.

He added, “If you look at the east Asian econmies, you’re starting to get some signs of faster recovery but also potential inflation.”

He also said that if east Asian countries kept interest rates low in line with the US Federal Reserve “you could have some inflationary bubble effect.”

Zoellick was speaking ahead of annual meetings of the International Monetary Fund and the World Bank in Istanbul. The IMF had said on Thursday that the world economy’s recovery had begun but warned the crisis was not over.

The IMF forecast that China’s economy will expand by 8.5 per cent this year and 9.0 per cent in 2010 — better than the annualised growth of 7.5 per cent in 2009 and 8.5 per cent in 2010 it projected in July. –AFP