ADB raises developing Asia growth forecast to 8.2 percent, crediting recovery in exportsBy Min Lee, AP
Monday, September 27, 2010
ADB raises Asia growth forecast to 8.2 percent
HONG KONG — The Asian Development Bank raised its forecast for the region’s economic growth this year, crediting a rapid recovery in exports even as it warned the risk of another recession in advanced countries has not completely receded.
The Manila-based development bank said Tuesday it now expects developing Asia to grow 8.2 percent this year compared with a projection of 7.5 percent growth issued in April. The forecast, which doesn’t include Japan, covers 44 developing and newly industrialized nations in Asia.
“Overall, developing Asia’s recovery seems to have taken firm hold,” the ADB said in the report released in Hong Kong. Increased consumer and business spending as a result of government stimulus also played its part in the recovery from the financial crisis, it said.
In predictions for individual economies, the ADB maintained its forecast of 9.6 percent growth for China, the world’s second-biggest economy. The southern Chinese financial and legal services hub Hong Kong was revised upward to 5.8 percent. South Korea and Taiwan were raised to 6 percent and 7.7 percent respectively.
India’s anticipated growth was edged up from 8.2 percent to 8.5 percent, although the bank warned about high inflation due to scant monsoon rains in 2009 that suppressed harvests.
The Philippine economy was expected to jump 6.2 percent — up from an earlier prediction of 3.8 percent. Singapore is forecast to surge 14 percent — more than double the previous figure of 6.3 percent. Thailand’s outlook improved from 4 percent growth to 7 percent. The bank projected a 4.1 percent expansion for Pakistan in 2010, slowing to 2.5 percent in 2011 because of the country’s recent flooding.
But the bank warned about possible weakness in the U.S., Europe and Japan, highlighting sluggishness in the American housing market and the risk of sovereign debt defaults in Europe.
“The global recovery remains shaky, and downside risks lurk. The possibility of a double-dip recession in the major industrial economies has not receded completely,” the report said.
ADB President Haruhiko Kuroda told reporters in Kuala Lumpur that a double-dip recession isn’t likely as the U.S., Europe and Japan were recovering though at a slower pace than expected.
He said Asian currencies need to strengthen to reduce the global imbalance of weak consumption in developing countries and large trade deficits in developed nations.
“I think high growth will continue in the coming years,” Kuroda said on the sidelines of a business conference. “I do think the emerging currencies in Asia need to be more flexible and probably need to appreciate.”
The United States has accused China of keeping its currency the yuan “artificially weak” to make its exporters more competitive. Some American lawmakers have pushed for punitive action if China fails to move faster. China promised more exchange rate flexibility in June but the yuan has risen by less than 2 percent against the dollar since then.
The ADB said growth in China will taper off in the second half after expanding 11.1 percent in the first half as Beijing phases out expansionary fiscal and monetary policies and weaker export growth.
The report said the Chinese government is increasing housing supply, tightening credit requirements and pulling state-owned companies from the housing market to cool the sharp hike in real-estate prices in major cities.
In India, while policymakers will face increased inflation pressures, exports are expected to grow by 18 percent this year, with IT services, jewelry and agricultural products among the stalwarts.
The South Korean economy was lifted by a surge in car and semiconductor exports in the first half, but growth is projected to slow from 7.6 percent to 4.5 percent in the second half — also due to pared down fiscal spending.
In Taiwan, recovery was driven by electronics exports in the first half but will be dragged down in the second half by weaker demand from China — now Taiwan’s biggest export market.
Surprisingly strong growth in Singapore in the first half prompted the ADB to drastically upgrade its outlook for the year. The city-state was helped by demand for chemicals, electronics and drugs, as well as financial and tourism services. The booming Chinese market was a big booster, accounting for 40 percent of first-half exports.
Thailand’s prospects were also raised on the strength of 10.6 percent growth in the first half despite violent anti-government protests in April and May that spooked tourists. Domestic demand help prop up the expansion.
The ADB was also more bullish about the Philippines because of a strong recovery in trade and investment. Electronics manufacturing, construction and mine production were ramped up in the first half.
Associated Press writer Eileen Ng contributed from Kuala Lumpur, Malaysia.
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