Although economic growth is continuing to slow this year, emerging East Asia has already entered the transition from recession to recovery, says the July issue of the Asia Economic Monitor.

Deep recessions in the US, Europe, and Japan will continue to hurt emerging East Asian economies, especially the smaller ones that are highly reliant on exports. But larger economies in the region that have implemented major fiscal packages are beginning to see results from the domestic stimulus, most notably the People’s Republic of China (PRC).

"Emerging East Asia could see a V-shaped recovery, with growth dipping sharply in 2009 before regaining last year’s pace in 2010,” said Jong-Wha Lee, ADB Chief Economist and Head of the Office of Regional Economic Integration.

However, given the tentative nature of the expected recovery, it is critical that authorities stay the course in supporting domestic demand and growth. Monetary and fiscal policies in the region need to remain accommodative until the recovery gains substantial traction, says the AEM.

It is also important that the region looks beyond the crisis and focuses on longer-term issues related to financial regulatory reform. In a special chapter, the AEM underscores the need to maintain financial stability in the region.

"Regulatory reform should eliminate gaps and overlaps, avoid regulatory arbitrage, increase transparency, and improve coordination among relevant authorities," Mr. Lee said. "Emerging East Asia should reinforce cooperation in enhancing financial stability by accelerating regional initiatives, and actively participate in designing the new global financial architecture."

Emerging East Asia covers the 10 members of the Association of Southeast Asian Nations plus the PRC; Hong Kong, China; Republic of Korea; and Taipei,China.