Asian Leaders Caution Against Stimulus Removal

Singapore, Nov. 13, 2009--Government and business leaders at the Asia-Pacific Economic Cooperation forum warned Friday against withdrawing stimulus programs too quickly amid a growing recognition the global economic recovery will be led by China, India and other Asian countries.

The biggest economic crisis since the 1930s has been the focus of this year's  forum, an annual gathering of 21 member economies from Asia and the Pacific Rim.

"The measures the governments will take in a few months ... will determine how quickly we can recover and whether we can sustain our growth," Singaporean Prime Minister Lee Hsien Loong said in a keynote speech at a conference of business and state leaders on the sidelines of APEC.

An electronic poll of the audience showed that a majority thought the worst of the crisis was over but major challenges to stable growth remained.

Following the crisis, governments across the world pumped huge amounts of money into the system to promote economic growth. A large part went to provide liquidity to banks and major companies facing bankruptcy. Money was also given directly to households, sometimes in the form of shopping vouchers. Rebates were paid for car purchases.

The U.S. injected $787 billion in stimulus plans. Asia, led by China's $586 billion package, pumped in more than $1 trillion. Policy makers worry that a sudden reduction of such spending will destroy consumer and business confidence.

"There must not be any premature withdrawal of fiscal incentives or fiscal packages until there is real recovery led by the private sector," Malaysian Prime Minister Najib Razak said during a panel discussion later.

Singapore's leader said governments worldwide must coordinate the timing of withdrawal of their stimulus packages. Deferring the withdrawal for too long risks creating asset bubbles that can become a "serious problem."

"How to withdraw that in a coordinated way ... that's going to be a very delicate exercise," Lee said.