Asia’s emerging economies will slow next year as the global financial crisis saps export demand and capital flows, the Asian Development Bank (ADB) said yesterday.
Swift, decisive action by policy makers will help stem the impact of the crisis, the Manila-based bank said.
“The external economic environment for developing Asia is likely to worsen as major industrial economies contract further, global financial conditions remain constricted, and world trade growth slows sharply,” said the semiannual report, titled Asia Economic Monitor.
Collective economic growth in developing Asia — a sprawling region that includes 44 economies from the central Asia republics to the Pacific islands — is projected to expand 5.8 percent next year, down from an expected 6.9 percent this year, the report said.
“2009 is likely to be a difficult year for developing Asia but it will be manageable if countries respond decisively and collectively,” said Lee Jong-wha, head of the bank’s Regional Economic Integration office.
“Swift action by policy makers to stem both the threat to the financial systems and the real economy will allow most of the region’s economies to sustain a healthy if slower expansion,” Lee said.
Lee said Asian countries need to strengthen their coordination in exchange rates and fiscal policies to address the negative impact of the global financial crisis.
“Now the balance of risks has shifted from raising inflation to a slowing growth, so this can provide some margins for monetary authorities to ease,” Lee said in a news conference in Hong Kong.
Economies that depend on exports are particularly vulnerable.
“Weakening demand for manufactured goods in major industrial countries means declining export orders from Asia, with knock-on effects for industrial production,” the report said.
“Global trade volume is rapidly slowing down and is expected to barely expand in 2009, creating difficulties for regional economies that rely on exports for growth,” it said.
Meanwhile, aggregate GDP of East Asia — China, Hong Kong, South Korea, Mongolia and Taiwan but not Japan — is projected to grow by 6.2 percent next year, down from an expected 7.4 percent this year.
China’s economic gallop is expected to slow to 8.2 percent next year from 9.5 percent this year. But it will remain the world’s fastest growing economy into next year.
The report said outlook for China would be weaker without its government’s recently announced US$586 billion stimulus program to spur domestic demand.
In South Asia, economic growth is likely to reach 6.1 percent as India reels from direct blows of the global financial crisis on its banking system and financial market.
Growth in India is seen at 6.5 percent next year, down from 7 percent this year.
Emerging East Asia will post 5.7 percent economic growth next year, down from an estimated 6.9 percent this year, the report said. The subregion includes ASEAN, China, Hong Kong, Taiwan and South Korea.
The bank report said the forecasts could be undermined by sharper or prolonged global recession, persistent financial stress with volatile capital flows, further tightening of external and domestic funding, and foreign exchange volatility.