Asia-Pacific bubble may burst: UN report

The United Nations Economic and Social Commission for Asia and the Pacific has warned the region's governments to protect and prepare against sudden or unexpected market downturns rather than remaining complacent in the current atmosphere of prosperity.

Asian countries have to stay alert despite the lull in financial markets recently, says UNESCAP in a new report titled The Calm Before the Storm: Managing the Risks of an Asia-Pacific Financial Downturn.

"There are a number of new emerging risks which may lead to more stormy weather ahead," the report warns, citing possible interest rates hikes in developed countries, oil price shocks, housing market overheating, and investor overreaction and contagion.

The region has bitter memories of the 1997 Asian financial crisis, but the report notes that countries there are now in

a stronger position to handle turbulence.

"Governments have improved economic policies, depend less on portfolio flows, and have bigger foreign reserves and better banking sectors."

The report cautions that "as Asian economies are becoming more integrated into the global economy, they also face a higher risk from the constantly shifting global environment."

It calls on governments to focus on controlling inflation and debt, improving banking regulations, and monitoring complex financial products. "Countries in the Asia-Pacific region must improve regional cooperation to lessen the impact of financial market volatility," the report says.

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