Manila/Bangkok: Asian economies will expand less than previously forecast this year, the Asian Development Bank (ADB) said, as Europe’s debt crisis crimps growth from China to India.
Asia excluding Japan will expand 6.6% this year compared with an April estimate of 6.9%, ADB president Haruhiko Kuroda said in a briefing in Bangkok on Thursday. Growth will be 7.1% in 2013, compared with a previous forecast of 7.3%, he said.
The outlook for developing Asia has weakened due to the difficult global environment and slower growth in China and India, ADB said in a report released on Thursday. Worries over the economic strength of important developing economies have also emerged recently.
South Korea unexpectedly cut interest rates for the first time in more than three years on Thursday, joining the European Central Bank, People’s Bank of China and Bank of England in loosening monetary policy this month amid mounting pressure to bolster their economies. International Monetary Fund managing director Christine Lagarde said last week the lender’s new global growth forecast due next week will be lower than the previous one.
India will grow 6.5% this year, compared with a previous estimate of 7%, while China will expand at an 8.2% pace from 8.5%, Kuroda said, adding that China still has room to introduce fiscal measures.
While weaker global demand is crimping exports in the region, it is also helping ease international oil and food costs, which is reducing price pressures, ADB said.
Developing Asia’s inflation rate should slow to 4.4% in 2012 from the 4.6% pace forecast in April, and will likely continue at the same pace next year, ADB said.
Government spending on health, education and infrastructure projects should help give the Chinese economy a boost as the nation moves to a more sustainable growth model, ADB said.
India’s outlook is clouded by a combination of high inflation and poor demand, both externally and internally, with price pressures expected to persist, primarily due to accelerating food costs.
In South-East Asia, domestic demand and reconstruction should keep growth robust, with a strong rebound seen in Thailand and healthy expansion also in the Philippines and Indonesia, the ADB said. The region is expected to expand 5.2% in 2012 and 5.6% in 2013, little changed from earlier estimates.
Most South-East Asian governments have sufficient policy space to ease monetary policy and provide fiscal stimulus if needed, ADB said.
Indonesia kept interest rates unchanged for a fifth month on Thursday as inflationary risks persist and the currency slumps.
Growth in Southeast Asia’s largest economy has held above 6% even as inflation accelerated to a nine-month high in June.
The rupiah has fallen more than 4% this year.
Suttinee Yuvejwattana and Tony Jordan in Bangkok contributed to this story.