Asian Development Bank upgrades region's growth forecasts

Sep 22, 2009, 7:40 GMT

   Manila - The Asian Development Bank on Tuesday upgraded its economic growth forecasts for the region, which it said was proving to be more resilient to the global downturn than initially expected.

   The Manila-based bank said economic expansion in developing Asia was expected to now come in at 3.9 per cent in 2009, up from its original forecast of 3.4 per cent.

   In 2010, the growth projection was upgraded to 6.4 per cent from 6 per cent, it said in an update on its annual Asian Development Outlook report.

   'Stronger growth in East Asia and South Asia underpinned the improved prospects,' the bank said in a statement.

   It also attributed the upgrade to firm action by many governments and central banks to the global economic crisis, the relatively healthy state of financial systems prior to the crisis and the rapid turnaround in the region's larger, less export-dependent economies.

   'Despite worsening conditions in the global economic environment, developing Asia is poised to lead the recovery from the worldwide slowdown,' bank chief economist Jong-Wha Lee said.

   Economic growth forecast in East Asia was upgraded to 4.4 per cent from 3.6 per cent. China alone is now expected to grow by 8.2 per cent in 2009 and 8.9 per cent in 2010, up from the March forecast of 7 per cent and 8 per cent, respectively.

   'A shallower contraction in South Korea is also expected on the back of effective fiscal stimulus measures,' the report added.

   However, the economies of Hong Kong and Taiwan were likely to shrink more sharply on account of severe drops in demand for their exports, it said.

   The bank said prospects for South Asia improved with growth expected to hit 5.6 per cent this year, up from the initial forecast of 4.8 per cent.

   'Emerging signs of a recovery in private business confidence and a continued large fiscal stimulus announced in the July 2009 budget helped bolster India's projected economic expansion to 6 per cent this year, upgraded from 5 per cent,' it said.

   The aggregate growth in South-East Asia was projected to slow to 0.1 per cent in 2009, compared with initial forecasts of 0.7-per-cent growth.

   Rising growth in Indonesia and Vietnam failed to overcome drops in South-East Asian economies most exposed to international trade, such as Malaysia, Singapore and Thailand, the bank said.

   Projections for Central Asia were also bleaker because of lower commodity prices, a deeper downturn in Russia, and weaker capital inflows, investments and remittances. Growth was forecast to slow to 0.5 per cent this year, compared with the initial prediction of 3.9 per cent.

   Despite the overall better outlook, Lee warned Asian economies against being complacent.

   'A protracted global slowdown or the hasty withdrawal of stimulus packages can degrade the region's ongoing recovery,' he said.

   The bank added that developing Asia should broaden the scope and structure of its openness to make its economies more resilient. It also urged policymakers to promote closer economic links within the region and a more balanced internal economic structure.