Manila: Asia’s emerging economies will slow next year as the global financial crisis saps export demand and capital flows, the Asian Development Bank said on Thursday.
Swift, decisive action by policy makers will help stem the impact of the crisis, the Manila-based bank said.
“The external economic environment for developing Asia is likely to worsen as major industrial economies contract further, global financial conditions remain constricted, and world trade growth slows sharply,” said the semiannual report, entitled Asia Economic Monitor.
Collective economic growth in developing Asia a sprawling region that includes 44 economies from the central Asia republics to the Pacific islands is projected to expand 5.8% next year, down from an expected 6.9% this year, the report said.
“2009 is likely to be a difficult year for developing Asia but it will be manageable if countries respond decisively and collectively,” said Jong-Wha Lee, head of the ADB’s office of Regional Economic Integration.
Meanwhile, aggregate gross domestic product of East Asia a subregion that includes China, Hong Kong, South Korea, Mongolia and Taiwan but not Japan is projected to grow by 6.2% in 2009, down from an expected 7.4% this year.
After years of rapid growth, China’s economic gallop is expected to slow to 8.2% in 2009 from 9.5% this year. But it will remain the world’s fastest growing economy into next year.
The report said outlook for China, Asia’s growth engine, would be weaker without its government’s recently announced $586 billion stimulus program to spur domestic demand.
In South Asia, economic growth is likely to reach 6.1% as India, the region’s most dynamic economy, reels from direct blows of the global financial crisis on its banking system and financial market. Growth in India is seen at 6.5% next year, down from 7% this year.
The report said the forecasts could be undermined by sharper or prolonged global recession, persistent financial stress with volatile capital flows, further tightening of external and domestic funding, and foreign exchange volatility.
For the short-term, the report called for close monitoring of the region’s financial system, identification of weak institutions and provision of adequate liquidity to critical institutions so credit continues to flow into the economy.
It also urged policy makers to prevent slowing economic growth from spilling over onto the region’s banking systems.