Growth in developing Asian economies should rise more than 8 percent this year and next year, buoyed by strong performances from China and India, the Asian Development Bank (ADB) said yesterday.
In a regional update, it forecast a modest slowing of growth and warned of higher risk factors next year, arising notably from a tightening in credit markets.
"Momentum in [China] and India supports fast growth at the regional level," the Philippines-based lender said, raising the region's GDP forecast for this year to 8.3 percent from 7.6 percent.
PHOTO: AFP
Next year's growth should be 8.2 percent, up from the earlier forecast in March of 7.7 percent, an update of its Asian Development Outlook report released yesterday.
China, on the back of a 13-year high 11.5 percent GDP growth in the first half, is now expected to grow 11.2 percent this year and 10.8 percent next year, up from the earliest forecast of 10.0 and 9.8 percent.
"The now familiar pattern of vigorous investment spending and rapid expansion of exports underpinned growth" in China, the report said.
Chief ADB economist Ifzal Ali said the resulting massive current account surpluses are seeping into domestic liquidity. He said this would put more pressure on Beijing to allow the yuan to appreciate more against the US dollar.
India, which grew by an 18-year high of 9.3 percent in the three months to June, is now expected to expand by 8.5 percent this year and next, up from ADB forecasts earlier this year.
"The brightest story we have to tell is about India," Ali said, praising its economy in reining in inflation.
Developing Asia, which excludes Japan, grew 8.5 percent last year.
The bank revised upward its inflation forecast for the region by a percentage point to 4 percent this year and by 0.6 points to 3.8 percent next year with oil prices expected to persist next year.
The ADB said this year's updated forecast anticipated a modest slowing of the global economy and a mild recovery in the US through next year.
"But the downside risks to growth in 2008 are elevated, and much will depend on whether distress in credit markets deepens and spills over into the wider financial system and real economy," the report said.
It said regional growth outside China and India would be a more modest 5.7 percent this year and 5.6 percent next year.
However, "there is a more general pattern of high and, in some countries, accelerating growth," it said.
It said the Philippines economy should grow 6.6 percent this year while Indonesia, the worst hit by the mid-1997 Asian crisis, was now expected to post GDP growth of 6.2 percent this year and 6.4 percent next year.
"Inflation has been brought to heel. Consumption and investment are up sharply, the business and investment climate is improving and we are seeing signs that Indonesia might finally break out of the 5 percent range and go beyond the 6 percent growth rate," Ali said.
The forecast for East Asia was raised to 8.9 percent this year and 8.7 percent next year, while Southeast Asia's forecast was upgraded to 6.1 percent for both years.
South Asian growth would also rise to 8.1 percent for both years, it added.
A US recession could clip growth in developing Asia by between 1 and 2 percentage points, it said, but the impact should be "modest and short-lived."
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