Cover -- Contents -- Definitions -- Executive Summary -- I. Navigating an Uncertain Global Environment -- A. Resilient Domestic Demand Amid Pockets of Inflation Pressure -- B. An Uncertain Global Environment Poses Downside Risks -- C. Stress in the Euro Area and United States: Spillovers to Asia -- D. How Vulnerable Are Asian Banks and Firms? -- E. Policy Challenges -- II. Drivers and Implications of Rapid Credit Growth in Emerging Asia -- A. Episodes of Rapid Credit Growth in Emerging Asia -- B. Domestic versus External Factors and the Role of Monetary Policy -- C. Conclusions -- III. Asia's Quest for Inclusive Growth -- A. How Does Asia Compare With Other Regions? -- B. Poverty, Growth, and Inequality -- C. Policies -- IV. The Benefits of Further Financial Integration in Asia -- A. Assessing the Degree of Financial Integration in Asia -- B. Risk Sharing versus Contagion -- C. Policy Implications -- D. Conclusions -- V. Asian Low-Income and Pacific Island Countries: Managing Inflation Risks and Strengthening Growth Prospects -- A. Recent Inflation Trends in Asian LICs -- B. Pacific Island Countries: Improving Resilience to External Shocks -- References -- Boxes -- 1.1 Vietnam: Stabilization at the Crossroads -- 1.2 How Large Are Chinese Inflation Spillovers to the Region? -- 1.3 Recent Trends in ASEAN Exports to China -- 1.4 Sterilization of Reserve Accumulation in Times of Large Capital Inflows -- 1.5 A Strategy for Growth and Fiscal Sustainability in Japan -- 4.1 Assessing the Contagion of Systemic Risk form Financial Integration through Banks -- Tables -- 1.1 Asia: Real GDP -- 3.1 Number of People Living on Less than 1.25 per Day -- 3.2 Pro-poor and Inclusive Growth Measures -- 5.1 Selected Asia: Decomposition of Inflation and Exchange Rate Regimes -- 5.2 Selected Asia: Monetary Conditions -- Figures.

1.1 Selected Asia: Real GDP at Market Prices -- 1.2 Selected Asia: Exports of Goods -- 1.3 Selected Asia: Financial Condition Index (FCI) -- 1.4 Selected Asia: Contributions to Year-to-Date Changes in REER -- 1.5 Selected Asia: Change in Inflation Rates since January 2011 -- 1.6 Selected Asia: Inflation Target Tracker -- 1.7 Emerging Asia: Equity and Bond Funds--Weekly Net Flows in 2011 -- 1.8 Selected Asia: Trade Links to Japan and Export Growth in 2011:Q2 -- 1.9 Selected Asia: Contributions to Projected Growth -- 1.10 Selected Asia: Headline Consumer Price Inflation -- 1.11 Selected Asia: Current Account Balances -- 1.12 Asia: GDP Growth -- 1.13 Selected Asia: Foreign Holdings in Local Currency Government Bonds -- 1.14 Consolidated Claims of European and U.S. Banks on Selected Asia -- 1.15 Selected Asia: U.S. Dollar--Local Currency Basis Swap Spreads -- 1.16 Selected Asia: Impact of Severe Global Slowdown on Real GDP Growth -- 1.17 Selected Asia: Impact of Severe Global Slowdown on Selected Indicators -- 1.18 Selected Asia: Impact on Real GDP Growth of Discretionary Fiscal Spending in China -- 1.19 Emerging Asia: External Bond Issuance by Corporations -- 1.20 Emerging Asia: Leverage in Corporate Sector -- 1.21 Selected Asia: Debt-to-Equity Ratio -- 1.22 Asia: Debt-to-Equity Ratio during Recoveries from 2001 and 2008 Recessions -- 1.23 Emerging Asia: Leverage in Different Sectors -- 1.24 Selected Asia: Tier 1 Ratio of Top 25 Banks -- 1.25 Emerging Asia: Overheating Map -- 1.26 Selected Asia: Change in Inflation Expectations for 2011 since March 2011 -- 1.27 Selected Asia: Overheating Index and Vulnerabilities to a Slowdown in Growth in G-2 -- 1.28 Selected Asia: Change in General Government Cyclically Adjusted Fiscal Balance -- 1.29 Selected Asia: Fiscal Space -- 1.30 Selected Asia: Cyclically Adjusted Changes in General Government Spending.

1.31 Selected Asia: Deviation from Model-Based Norms of Public Spending on Health and Education -- 1.32 Selected Asia: Deviation of Retail Gasoline and Diesel Prices from International Prices -- 1.33 Selected Asia: Increase in Net Oil Subsidy -- 2.1 Nominal Credit to Private Sector -- 2.2 Crises Associated with Emerging Market Credit Booms -- 2.3 Real Credit -- 2.4 Credit Booms Across Emerging Economies -- 2.5 Emerging Asia: Real Credit Growth and the Role of Domestic versus External Factors -- 2.6 Real Credit Growth in Emerging Asia: Forward-Looking Scenarios -- 3.1 Stylized Facts: Asia's Growth Experience over the Last Two Decades -- 3.2 Selected Asia: Change in Poverty and Inequality during the Global Crisis -- 3.3 Income Elasticity of Poverty Reduction -- 3.4 Degree of Inclusiveness of Growth -- 3.5 Fiscal Policy and Inclusiveness -- 3.6 Labor Market Institutions and Inclusiveness -- 4.1 Regional and Nonregional Sources of Portfolio Investment Liabilities, 2001-09 -- 4.2 Trade and Financial Integration, 2001-09 -- 4.3 Deviations from Model-Based Norms of Financial Integration -- 4.4 Risk Sharing within and between Regions -- 4.5 Trade-Offs between Risk Sharing and Contagion -- 4.6 Decomposing the Gap between International Risk Sharing in Asia and the G-2 -- 4.7 Effect of Financial Integration on Current Account Surplus -- 5.1 Selected Asia: Inflation and World Prices -- 5.2 Selected Asia: Headline Inflation, January 2005-Latest -- 5.3 Selected Asia: Inflation Persistence, 2005-11 -- 5.4 Pass-Through from International Prices to Domestic Prices -- 5.5 PICs: Real GDP Growth -- 5.6 PICs Real GDP Growth: Correlation with Australia and New Zealand, 2002-10 -- 5.7 PICs (Commodity Importers): Real GDP Growth around Downturns -- 5.8 PICs: Impulse Response of Output Loss to Terms-of-Trade Shock.

5.9 PICs: Impulse Response of Output Loss to External Demand Shock.