Thu, Apr 19, 2007 - Page 11 News List

Buoyant growth forecast region's economies: UN

DEMAND The UN Economic and Social Commission for Asia and the Pacific said China, India and Japan will fuel momentum, but China and Japan will see slower growth

BLOOMBERG

The Asia-Pacific region's developing economies will expand at an average of more than 7 percent this year as demand from China, India and Japan fuel growth even amid a US slowdown, the UN said.

The area's developing economies, which stretch from Russia, Turkey and Iran to China and the Pacific islands, will expand 7.4 percent this year, down from 7.9 percent last year, the UN Economic and Social Commission for Asia and the Pacific said in an annual survey released in Bangkok yesterday.

Buoyant growth in the Asia- Pacific region could stoke global expansion even as a housing slowdown cools the US economy. In many of the region's economies -- though not China and Japan -- faster growth will be accompanied by slower inflation, as rising currencies and recent interest-rate increases curb price gains.

"As the international economic environment weakens, momentum in the region is expected to come from China, India and Japan," the commission said in its report.

"Together, these economies contribute over 60 percent of the gross domestic product of the Asia-Pacific region and close to 45 percent of imports, thereby creating considerable opportunities for the region," it said.

Japan and China will experience slower growth with faster inflation this year, the UN said.

China's economic growth will slow from 10.7 percent last year to 9.9 percent this year, while its inflation rate will pick up to 2 percent from 1.5 percent, the commission estimated.

"A stronger yuan and weaker electronics demand would reduce exports, while tighter domestic policy would slow investment," the agency said.

Japan's economy will slow to 1.9 percent this year from 2.2 percent last year, even as inflation grows from 0.2 percent to 0.7 percent.

"Ongoing fiscal consolidation, exchange-rate appreciation and the slowdown of the US economy will push growth down," the commission said.

Taiwan's economic growth is seen at about 4.1 percent this year, down from 4.2 percent last year, it said.

This contrasts with economies such as India, Australia, Indonesia, Malaysia and Vietnam, where growth will pick up as inflation slows. Investment will increase in Indonesia and the Philippines because of changes to government regulations, and in Malaysia due to higher public spending.

Rising oil prices could prevent the region from meeting the UN's forecast. A 10 percent oil price increase could cut 0.16 percentage points from growth, with Singapore, Thailand and the Philippines the hardest hit.

Other threats to the region include the possibility of a currency crisis similar to that experienced in East Asia in 1997; a rapid depreciation of the US dollar; an inability to find sources of economic growth other than exports; and the costs of pollution, congestion and poor infrastructure in the region's cities.

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