EAST Asian economies have reacted very quickly to the financial crisis but now have to deal with the global slowdown that will follow, said a World Bank economist on Wednesday.

'Virtually every one of these East Asian countries has been extremely active in responding to monetary policies, to credit policies, to exchange rate policies, and as a result, have dealt with the conditions of the financial crisis rather effectively,' said Mr Vikram Nehru, regional chief economist in the East Asia region, in a conference call.

But the financial crisis is now transforming into 'a crisis in the real sector', accompanied by a fall in foreign investments and export growth, he added.

'Already we're beginning to see East Asian countries shift their focus from monetary policy and financial responses more to fiscal responses to try and stimulate the domestic economy, to substitute domestic demand for an expected slowdown in export growth, and thereby try and mitigate some of the growth consequences of the crisis.'

China is well ahead of the pack with a recently announced 4 trillion yuan (S$877 billion) stimulus package, and most other economies in the region are expected to roll out fiscal boosts as well.

In Singapore, the Government has signalled that the upcoming Budget next year will be an expansionary one to spur growth and create jobs.

Fiscal stimulus - in the form of tax cuts or higher Government spending to boost the economy - is all the more important because deflation is fast surfacing as a worrying possibility, said World Bank chief economist Justin Lin in the call.

While tax cuts could help 'a little bit', Government spending on projects is more desirable, said World Bank chief economist Justin Lin in the call.

'Under the deflationary scenario, if you have a tax cut, people may save more instead of spending more,' he said.