Asia's developing economies are likely to grow at a faster pace than previously thought, the Asian Development Bank said on Tuesday. The bank attributed the optimism to the region's strong export-based recovery, robust private demand, and the sustained effects of stimulus policies.
The 45 economies of developing Asia - spanning from countries in the Pacific to Central Asia - are now forecast to expand an impressive 8.2%, well above the 5.4% growth recorded in 2009 and also above the 7.9% growth ADB forecast in July.
"Developing Asia's recovery has led the world. The speed and strength of the region's rebound continues to surprise on the upside," said ADB chief economist Jong-Wha Lee. "The V-shaped recovery has laid the foundation for sustained growth beyond the short-term."
In its Asian Development Outlook report, the development bank said despite Asia's strong rebound, inflationary pressures remain "manageable." The bank forecasts inflation to be generally within the central banks' comfort zones, at 4.1% for 2010 and 3.9% for 2011.
ADB said the one big risk facing developing Asia is the prospect of a double-dip in advanced economies, although it said the likelihood of industrialized countries falling back into a recession is small. The Manila-based lender expects growth in developing Asia to slow to 7.3% in 2011 due to numerous uncertainties in the global economy.
The bank maintained its forecast for Chinese GDP growth to 9.6% this year and 9.1% in the next, but urged Chinese authorities to boost domestic consumption to make growth more sustainable and inclusive in the long-term. "Longer term, failure to decisively implement the agenda to rebalance the [Chinese] economy risks jeopardizing the sustainability of growth," said Lee.
ADB forecast China's growth to slow to around 9% in the September quarter, and to 8% in the fourth quarter, from 10.2% in the June quarter. It predicted exports growth to slow in the coming months due to subdued global demand.
Meanwhile, the growth projection for the region's second largest economy, India, was raised to 8.5% for this fiscal year from 8.2%. Growth is expected to pick up further to 8.7% in 2011.
However, the bank warned that persistently high inflation and a rising rupee could harm India's growth prospects. "A well-grounded, robust recovery will depend on the ability of the various policymakers to coordinate effectively amongst themselves to achieve macroeconomic stability, and striking the right balance amongst growth, inflation, and competitiveness objectives will be a delicate manoeuvre," said Lee.
Growth in East Asia is projected to rise 8.6% this year, due to stronger than expected recoveries in Hong Kong, South Korea, and Taiwan. Southeast Asia's 10 sub-regional economies, meanwhile, are forecast to grow 7.4% on average.
The South Asian recovery is being boosted by India, the lender said, while the devastating floods in Pakistan are likely to depress growth across all sectors. ADB expects Pakistan's economic growth to fall to 2.5% in the next fiscal year from 4.1% this year.
Central Asia is forecast to grow 5.1% this year, boosted by higher oil prices and the recovery in Russia, the region's major trade and financial partner. Growth in the Pacific economies is expected to rise to 4.3% owing to more robust recoveries in the Solomon Islands and Timor-Leste.
Despite the robust growth forecasts, ADB urged emerging Asian economies to look past the near-term and target sustainable long-term growth through structural reforms.
"Strong and sustained growth is crucial for developing Asia's future prosperity," said Lee. "Despite its rapid pre-crisis growth and resilience during the crisis, the region lags far behind the industrial economies in per capita income and remains home to two-thirds of the world's poor."
For comments and feedback: editorial@rttnews.com