Manila: The Asian Development Bank (ADB) raised its economic growth forecast for the region on strengthening expansions in China, India and Indonesia, and said it’s too early for governments to withdraw stimulus policies.
Asia, excluding Japan, will grow 3.9% in 2009, faster than a March estimate of 3.4%, the Manila-based institution said in a report on Tuesday. Growth may accelerate in 2010 to 6.4%, it said.
The region is leading the world’s emergence from its deepest recession since the 1930s after Asian policymakers cut interest rates to unprecedented lows and governments announced at least $950 billion (Rs45.8 trillion) of stimulus measures, helping the global economy avert a spiral into another Great Depression.
Fragile recovery: A file photo of people shopping for groceries at a market in Beijing, China. Inflation in Asia may average 1.5% in 2009 compared with a March forecast of 2.4%, says ADB. Bernardo De Niz / Bloomberg
ADB said withdrawing the measures too soon may derail the fragile recovery, echoing comments by the Obama administration and European officials ahead of this week’s Group of Twenty nations summit in Pittsburgh.
Asia’s growth is a result of synchronized expansionary policies in the region, said Vishnu Varathan, an economist at Forecast Singapore Pte Ltd. The expansion doesn’t mean that the region is decoupling from the rest of the world, he said.
Asian governments may begin rolling back stimulus programmes as early as the first quarter of 2010, Varathan said. They may not be wrong, but the risk is that it could be a tad premature especially if they do it all at the same time, he added.
Confidence in the world economy held at a record high in September after reports suggested the recession is over and officials said they won’t rush to withdraw stimulus, a Bloomberg survey of users on six continents showed 17 September.
Recovery in Asia also hinges on the revival of growth in Europe and the US, as this will affect the region’s export-dependent economies, ADB said. US Federal Reserve chairman Ben S. Bernanke said last week the recession in the US has probably ended.
Any slippage in the major industrial economies’ recovery would delay the region’s return to its long-term growth path, ADB said.
Inflation in Asia may average 1.5% in 2009 compared with a March forecast of 2.4%, ADB said.
It expects inflation to accelerate to 3.4% next year as growth strengthens.
Central banks in the region will therefore want to put a tight watch on monetary policies so as not to encourage asset bubbles that would inflate prices to levels that are no longer justified by fundamentals, ADB said.
China will expand 8.2% this year, compared with the March forecast of 7%, ADB said. India’s economy will grow 6% this year, up one percentage point from the earlier estimate, it said.
ADB forecast Indonesia’s economy will expand 4.3% this year, compared with the March estimate of 3.6%. South Korea’s economy will shrink 2% in 2009, compared with the earlier predicted 3% contraction, it said.
In South--East Asia, ADB forecasts, the economies of Thailand, Malaysia and Singapore will shrink this year, dragging growth in the region to 0.1% in 2009. The East Asian economies of Taiwan and Hong Kong will also contract, it said.