ADB forecasts 7.6 percent growth for developing Asian economies

April 2nd, 2008 - 5:33 pm ICT by admin  

Manila, April 2 (Xinhua) The Asian Development Bank (ADB) Wednesday said developing Asian economies would register a 7.6 percent growth in 2008 despite a slowdown in major industrial economies. The Manila-based bank said in its annual publication Asian Development Outlook 2008 (ADO), that economies would expand by 7.6 percent in 2008 and 7.8 percent in 2009.

This follows the highest growth in almost two decades in developing Asian economies in 2007 when they registered 8.7 percent.

“Asia will not be immune to the global slowdown, neither will it be hostage to it. It remains tied to global activity through traditional trade channels, and increasingly, through its closer integration in international financial markets,” said ADB Chief Economist Ifzal Ali, who presented the report in Hong Kong, according to a statement released by ADB.

Ali attributed the strong growth in the region to “favourable policy conditions and impressive productivity growth associated with Asia’s economic modernisation and structural transformation”, the statement said.

However, ADB warned that a “palpable inflation spiral” is threatening the growth in Asia and urged policy-makers to keep a close watch on it.

Inflation is expected to “spike” in 2008 and could hit a decade-long regional high with an average of 5.1 percent this year and 4.6 percent next year in the whole region, the report said.

The price rise will be highest in Central Asia with a two digit inflation rate, while inflation is running at an 11-year high in China and is a threat to other countries like Vietnam, said ADB.

ADB urges policy-makers to tackle the problem of inflation at its root.

“For some economies, this may mean a more flexible exchange rate, while in others it may need a scrutiny of fiscal spending and priorities and, in some cases, targeted measures may be warranted to ease supply pressures that are piling on to cost pressures,” said the report.

Growth in China and India, two “powerhouses” of the region, is expected to moderate as authorities tighten policies to rein in blistering demand and ease inflationary pressures, said the report.

China is expected to grow by a solid 10 percent in 2008 and the Indian economy is forecast to expand by eight percent, said ADB.

ADB said the slowdown in the economies of the US, European Union and Japan will have a more pronounced impact on China, which is more open to trade than India.

Growth in East Asia is expected to decelerate in 2008 to 8.1 percent from 9.3 percent in 2007. Southeast Asia will slow to 5.7 percent in 2008, from 6.5 percent in 2007, as its export prospects are likely to be affected by a slowdown in the global economy, said ADB.

Only Thailand is expected to post higher growth after a return to normalcy in politics. Vietnam’s economic expansion will moderate as it grapples to “keep a lid on inflation”.

South Asia is also expected to “lose some steam” in 2008 mainly on moderation of growth in India. Pakistan, Bangladesh and Sri Lanka will also be affected by economic deceleration in major markets, as garment exports are expected to suffer, it said.

Growth in Central Asia is expected to decelerate sharply to 7.5 percent in 2008 from double digit levels in recent years, on the back of weaker expansion in the region’s largest economy, Kazakhstan, said ADB.

Meanwhile, economic expansion in the Pacific Islands is expected to pick up in 2008 with the region’s biggest economy, Papua New Guinea, benefiting from high global commodity prices and Fiji Islands forecast to grow after contracting in 2007.

ADB said Asian economies are faced with a range of structural constraints such as macroeconomic stability, integrating into the global economy, getting prices to send the right signals, creating a conducive business and investment climate and above all, ensuring that the benefits of growth are shared by all.

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