Manila: Growth in developing Asian economies should rise more than 8% this year and next buoyed by strong performances from China and India, the Asian Development Bank said on 17 September.
In a regional update, it forecast a modest slowing of growth and warned of higher risk factors next year, arising notably from a tightening in credit markets. “Momentum in (China) and India supports fast growth at the regional level,” the Philippines-based lender said, raising the region’s gross domestic product (GDP) forecast for this year to 8.3% from 7.6%.
Next year’s growth should be 8.2%, up from the earlier forecast in March of 7.7%, according to an update of its Asian Development Outlook report released on 17 September.
China, on the back of a 13-year high 11.5% GDP growth in the first half, is now expected to grow 11.2% this year and 10.8% in 2008, up from the earliest forecast of 10% and 9.8% respectively. “The now familiar pattern of vigorous investment spending and rapid expansion of exports underpinned growth in China,” the report said.
India, which grew by an 18-year high of 9.3% in the three months to June, is now expected to expand by 8.5% this year and next, up from ADB forecasts earlier this year.
“The brightest story we have to tell is about India,” chief ADB economist Ifzal Ali said, praising its economy, which accounts for 80% of South Asian GDP, in reining in inflation. Developing Asia, which excludes Japan, grew 8.5% last year. The bank revised upward its inflation forecast for the region by a percentage point to 4.0 % this year and by 0.6 points to 3.8% next year.
The ADB said this year’s updated forecast anticipated a modest slowing of the global economy and a mild recovery in the United States through 2008. “But the downside risks to growth in 2008 are elevated, and much will depend on whether distress in credit markets deepens and spills over into the wider financial system and real economy,” the report said.
The bank said regional growth outside China and India would be a more modest 5.7% this year and 5.6% next year. However, “there is a more general pattern of high and, in some countries, accelerating growth,” it noted.
It said the Philippines economy should grow 6.6% this year after it expanded by a near two-decade high of 7.3% in the first half, and that Indonesia is now expected to post GDP growth of above 6%.
The forecast for East Asia was raised to 8.9% this year and 8.7% next year, while Southeast Asia’s forecast was upgraded to 6.1% for both years. South Asian growth would also rise to 8.1% for both years, it added. Depending on its timing, severity and duration, a US recession could clip growth in developing Asia by between 1.0 and 2.0 percentage points, it added, but the impact should be “modest and short-lived.”
Simultaneous steep downturns in the United States, the European Union and Japan -- an event the ADB judges improbable -- would put the region at greater risk, although robust reserves and improved financial systems placed it in a better position to weather the storm.
Ali said the region was unlikely to suffer any repeat of the 1997 Asian financial crisis, citing massive foreign exchange reserves and increased intra-regional trade. “The fate of Asia lies within Asia,” he added.