TOKYO (Reuters) - Tightening external funding conditions will likely weigh on growth in emerging Asia, although weaker currencies and robust domestic demand may offset some of the pain, the International Monetary Fund's top official for Asia said on Wednesday.
"A faster than expected tightening of global funding conditions could substantially affect Asia, with a larger impact on economies with weaker fundamentals and higher exposures," IMF Asia-Pacific Department Director Anoop Singh said in a round-table session in Tokyo on the region's economic outlook.
Singh said countries like India and Indonesia, which are reliant on foreign capital inflows and already experiencing elevated inflationary pressures, will likely need to tighten monetary policy further.
"India would need to take the steps that need to be taken to bring inflation down," Singh said after the Reserve of India's decision on Tuesday to tighten monetary policy.
"It doesn't only have to count on monetary policy," he said. "It's important that supply measures taken ... the government is trying to act on both fronts."
On Japan, he said the government's decision to raise the sales tax to 8 percent from 5 percent next April has been a right move and must be followed by the second stage of tax increase in late 2015 that will bring the rate to 10 percent.
"As a next step, the government should outline a more specific fiscal plan" on how to achieve its goal of slashing the country's public debt-to-GDP ratio by 2020, he said.
In its latest forecasts issued this month, the IMF expects emerging Asian growth of 6.3 percent this year followed by 6.5 percent next year, both lower than estimates made in April. (Reporting by Leika Kihara; Editing by Shinichi Saoshiro)
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