Developing Asia To See Pick Up In Growth; Recovery Vulnerable To Shocks: ADB

ADB 040913

The Asian Development Bank said Tuesday that growth in Developing Asia will likely rebound this year, driven by growing private consumption and intra-regional trade, but warned the recovery faces considerable risks from economic developments in the US and Europe.

In the latest edition of its flagship Asia Development Outlook 2013, the Manila-based lender said it expects the region to grow by 6.6 percent in 2013, unchanged from its prediction in the December supplementary report. The region's economy is seen expanding 6.7 percent in 2014. This would mean an acceleration in the pace of growth from the 6.1 percent witnessed in 2012.

The report warned that political risks linked to wrangling over the US debt ceiling, fatigue over tough austerity measures in the Eurozone, and long simmering tensions over border disputes in Asia were the main threats to the near term outlook.

"The region's favorable fiscal position cannot be taken for granted, with improved revenue efficiency, better governance, and other longer-term structural issues needing to be addressed," the report added.

At the same time, the lender cautioned that stronger economic activity this year could spur renewed price pressures, and inflation may rise to 4 percent this year and pick up pace to 4.2 percent in 2014 from 3.7 percent last year.

China is forecast to expand 8.2 percent this year on the back of rising domestic demand and improved exports after growth plunged to a 13-year low of 7.8 percent last year. However, the growth is expected to edge back slightly to 8 percent in 2014, as the government moves to cool pressure on the environment and to address income inequality.

The Indian economy is projected grow 6 percent in the fiscal year ending March 2014, down from the December projection of 6.5 percent growth. The GDP is then expected to pick up slightly to 6.5 percent in the following fiscal year.

ADB expects advanced country central banks to persist with their accommodative monetary policy. The Federal Reserve, the European Central Bank and the Bank of Japan all resorted to unconventional measures, as traditional monetary policy proved inadequate in these economies due to severe credit constraints and near-zero nominal interest rates.

"The advanced economies are expected to continue expanding liquidity, which has repercussions for developing Asia in its current macroeconomic situation," the report said.

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