East Asian Recovery Firmly on Track, Allows Stimulus Withdrawal - ADB

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MANILA, July 20 (Reuters) - East Asia's economic upturn is firmly on track and extraordinary fiscal and monetary stimulus should be gradually withdrawn, including by allowing currencies to strengthen, the Asian Development Bank said on Tuesday.

China's return to more normal policy settings should include allowing the yuan to ''appreciate at a pace appropriate to domestic economic conditions,'' the Manila-based ADB said in its Asia Economic Monitor.

The region's strong upturn this year saw the ADB raise its forecasts for growth in 2010 for many emerging East Asia economies, although not China. The forecast for growth in the region was raised to 8.1 percent from 7.7 percent.

Singapore's growth forecast was nearly doubled to 12.5 percent from a projection of 6.3 percent in the ADB's Asian Development Outlook in April.

''The external environment has become more uncertain for the region as the sovereign debt crisis casts some doubt on the strength of the global recovery,'' the report said.

''Nevertheless, the economic recovery in emerging East Asia remains firmly on track as solid domestic demand complements the return of exports in supporting growth across the region.''

The ADB noted a strong first quarter had lifted the region's economies above peak pre-crisis GDP levels.

The ADB said headline inflation had increased across the region, but was still relatively low and manageable.

The ADB defines emerging East Asia as China, Hong Kong, South Korea, Taiwan, Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar, and Vietnam.

It outlined three major risks - a disruption in the recovery in advanced economies, destabilizing capital flows, and unintended policy errors or an inappropriate policy mix. …