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ADB ups 2002 growth forecast for Asia

The Asian Development Bank (ADB) revised its 2002 economic growth forecast for developing Asia slightly upwards yesterday but cautioned the region is vulnerable to external risks.

The Manila-based bank said growth in the region's 41 developing economies was expected to strengthen from an average of 3.7 percent in 2001 to 5.0 percent in 2002 -- up slightly from 4.8 percent forecast last April.

For 2003, however, the ADB revised the region's growth forecast down to 5.7 percent from 5.8 percent, citing expected moderation in the expansion in external and domestic demand.

Although the ADB expects developing Asia's recovery to strengthen in 2002-2003, there was "substantial uncertainty about the sustainability of the world economic expansion," ADB chief economist Ifzal Ali told reporters.

Speaking at the release of the bank's Asian Development Outlook 2002 report, he said enhancing domestic economic resilience was of utmost importance for the region because of "significant external economic risks in the short and medium term."

The most significant risk cited by the report was weakening external demand if the US recovery stalled and the world economy slipped back into recession.

Other risks include financial sector weakness, the threat of price deflation after a global trend of low and falling inflation and oil price spikes.

The bank pointed out in the report that the enhanced 2002 outlook for developing Asia was not uniform across the region.

"While export performance has generally improved, the impact has been offset by adverse weather conditions in South Asia, reinforced by strong investment growth in Central Asia, and strengthened by relatively robust consumption expansion in East Asia and Southeast Asia," it said.

In Southeast Asia, most eco-nomies were growing faster than anticipated despite a slower-than-expected recovery in exports and with investments showing only limited signs of recovery.

Most of the growth appeared to be driven by public and private consumption expansion.

The ADB said Southeast Asia should experience average growth of 3.8 percent in 2002 and 4.6 percent in 2003.

Meanwhile, the world economy is expanding at a slower pace than earlier thought and risks lie ahead, IMF first managing director Anne Krueger said Tuesday.

"It is obviously expanding, possibly somewhat less rapidly than it was earlier thought," the top IMF official told a news conference.

"There are obviously the downward fragilities," she added.

Krueger was speaking as the Fund released its annual report and ahead of the release of its semi-annual World Economic Outlook in the run-up to IMF and World Bank annual meetings next week.

In April, the IMF predicted the global economy would grow at a 2.8 percent pace this year, accelerating to 4.0 percent in 2003. The IMF will release its new forecast next week.

Despite the fragilities, the economy appeared to have shaken off most of the impact of the Sept. 11 attacks, Krueger said.

"The terrorist attacks did, of course, have a substantial impact on the global economy, which was already slowing, but most of those effects we think were temporary to a large degree," she said.

"The weaker global environment -- slower growth, weaker commodity prices and more risk aversion in financial markets -- showed through in increased demand for IMF loans by some of our member countries."
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