ADB Cuts Growth Projection of Developing Asia


Jakarta, Sep 14 (IANS): The Asian Development Bank (ADB) has cut its 2011 and 2012 growth forecasts for developing Asia amid ongoing worries about weak external demand from its key trading partners.

In its Asian Development Outlook Update 2011, ADB trimmed its full year forecast to 7.5 percent from 7.8 percent seen in April. The 2012 projection is also lowered slightly to 7.5 percent from 7.7 percent previously, a press statement said here Wednesday.

The slowdown in demand from the US and Europe continues to cast a cloud over the region, with export growth easing substantially in the second quarter of 2011 in leading economies, reported Xinhua.

"At the same time, strong domestic consumption and expanding intra-regional trade are helping to underpin still solid growth levels," said Changyong Rhee, ADB's chief economist.

The share of intra-regional exports among the largest economies in the region has increased from 42 percent in 2007 to 47 percent in the first half of 2011, the report noted.

Accelerating price pressures remain a threat to many economies, with the inflation rate for developing Asia expected to average 5.8 percent this year, up from an April projection of 5.3 percent. The rate should cool in 2012 to 4.6 percent as commodity prices recede but central banks will still need to keep a close watch and may need to take remedial action, it said.

Capital continues to flow into the region, although the pace has eased in recent months, and remains at manageable levels. However, policy makers should be prepared to act in the event of any upsurge in capital volatility once the US and European debt markets settle and advanced economies pick up again.

The report notes that many economies in the region are well placed to cope with soft global economic conditions for a while, provided the major industrial economies do not fall back into recession.

"Ample fiscal space, even after the recent spate of fiscal stimulus measures, and large foreign reserves provide a buffer against further downside risks," said Rhee.

In the longer term, the region must press forward with structural reforms that encourage domestic-led, inclusive growth, as demand from advanced countries is likely to remain subdued.

The ADB Wednesday cut China's growth forecast to 9.3 percent for the year from its previously estimated 9.6 percent.

The ADB also lowered its estimate for the country's economic growth to 9.1 percent from 9.2 percent for next year, according to the update to the Asian Development Outlook released Wednesday by the Manila-based lender.

China's economic growth slowed during the first half of the year, mainly due to the country's tightening policies and weakening outbound demand, said Paul Heytens, ADB country director for China, in the report.

The country's gross domestic product (GDP) rose by 9.5 percent year-on-year in the second quarter of 2011, tapering off from the 9.7-percent growth posted in the first quarter of this year and 9.8 percent in the fourth quarter of last year.

  

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