East Asia growth to slow down in 2008: Asian Development Bank

Dec 13, 2007, 4:29 GMT

Manila - East Asia's economic growth will slow down to 8 per cent in 2008 from a projected expansion of 8.5 per cent in 2007 amid greater risks from a weak external environment, an Asian Development Bank (ADB) report said Thursday.

According to the Manila-based bank's semi-annual Asia Economic Monitor, the external environment for East Asian economies was 'expected to weaken somewhat in 2008' amid volatility in financial markets and rising oil prices.

The monitor said the downgrade in the projected overall gross domestic product (GDP) growth of East Asia in 2008 was also due to the expected moderation of expansion in the region's key industrialized nations, such as China.

'The region's economic outlook is subject to greater downside risks now than just a few months ago,' said the report, which covers the 10 members of the Association of South-East Asian Nations (ASEAN), China, Hong Kong, South Korea and Taiwan.

The monitor noted that the risks included the possibility of a US hard landing, further tightening of global credit, an abrupt adjustment in exchange rates and a continued rise in oil and commodity prices.

Economic growth in China, the region's growth engine, is projected to slow down to 10.5 per cent in 2008 from an expected 11.4 per cent in 2007, while aggregate GDP in the 10 ASEAN members will moderate to 6.1 per cent in 2008 from 6.3 per cent in 2007.

GDP in Hong Kong is expected to slow down to 5.4 per cent in 2008, from a projected 6.1 per cent expansion in 2007. In Taiwan, economic growth will moderate to 4.8 per cent in 2008 from 5 per cent.

Only South Korea is projected to experience faster GDP growth of 5 per cent in 2008, from 4.8 per cent in 2007, the report said.

The ADB warned that inflation was rearing its head in many economies and that price pressures were likely to remain in 2008.

'Slower growth but rising inflationary pressures despite appreciating currencies pose major challenges to the region's policymakers,' said Hong-Wha lee, head of the ADB's Office of Regional Economic Integration.

The monitor urged East Asian economic managers to adopt greater flexibility of exchange rates and explore ways to maintain stability among intraregional exchange rates.

It also stressed the need for the region's economies to improve investment climate to boost domestic demand, manage capital inflows and strengthen domestic financial systems in a bid to underpin growth.