Developing Asia’s economic growth will slow to 6.9 percent this year because of weak global demand, the Asian Development Bank (ADB) said yesterday, as it warned that widening inequality could undermine political stability.
Despite cutting its forecast from a projection of 7.5 percent made in September last year, the bank said growth rates remained robust in most countries, where momentum is supported by rising domestic demand.
The 45 developing or newly industrializing countries that make up emerging Asia grew a combined 7.2 percent last year.
“In the early months of 2012, caution rather than optimism is the more dominant sentiment for global prospects,” the bank said in its Asian Development Outlook, its flagship annual report.
“Developing Asia is feeling the weight of these weaknesses among the major industrial countries. Yet it has managed to grow, steadily,” it added.
Growth in China, the world’s second-biggest economy, is expected to slow to 8.5 percent this year and 8.7 percent next year, after 9.2 percent last year.
Disappointing economic growth in the US, Japan and Europe, which are major markets for Asia’s export-oriented economies, is expected to continue for the next few years, the bank said.
In Japan, the recovery from last year’s devastating tsunami and nuclear disaster has been “uninspiring,” while the US is grappling with a “stubbornly high” unemployment rate and high household debt levels.
The bank forecast that emerging Asia’s growth would pick up to 7.3 percent next year.
However, the bank expressed concern that rapid growth in Asia has resulted in a widening rich-poor gap that threatens to undermine stability.
About 240 million more people could have been lifted out of poverty over the past two decades if income inequality had remained stable instead of increasing, ADB chief economist Changyong Rhee said.
“Inequality leads to a vicious circle, with unequal opportunities creating income disparities, that in turn lead to dramatic differences in future opportunities for families,” Rhee said.
He warned that the biggest risk to growth in the near-term comes from further shocks in eurozone countries, where a recession is now expected because of tough belt-tightening measures.
Further deterioration in Europe could stall a recovery in exports or dry up trade finance — both vital to Asia.
“Continued uncertainties in the eurozone and a further slump in global trade pose the biggest threats to the growth outlook,” Rhee said.
Inflation is expected to ease off after a year in which it rose to 5.9 percent across the region because of surging food and fuel prices. The bank expects consumer price inflation of 4.6 percent this year and 4.4 percent next year.
The Asian Development Bank, established in 1966, helps finance projects aimed at poverty reduction through loans, grants and technical assistance.