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ADB cuts growth projection of developing Asia

09-14-2011 13:34 BJT

JAKARTA, Sept. 14 (Xinhua) -- The Asian Development Bank (ADB) has cut its 2011 and 2012 growth forecasts for developing Asia amid ongoing worries about weak external demand from its key trading partners, a press statement said here on Wednesday.

In its Asian Development Outlook Update 2011, ADB trimmed its full year forecast to 7.5 percent from 7.8 percent seen in April. The 2012 projection is also lowered slightly to 7.5 percent from 7. 7 percent previously.

The slowdown in demand from the United States and Europe continues to cast a cloud over the region, with export growth easing substantially in the second quarter of 2011 in leading economies.

"At the same time, strong domestic consumption and expanding intraregional trade are helping to underpin still solid growth levels," said Changyong Rhee, ADB's Chief Economist.

The share of intraregional exports among the largest economies in the region has increased from 42 percent in 2007 to 47 percent in the first half of 2011, the report noted.

Accelerating price pressures remain a threat to many economies, with the inflation rate for developing Asia expected to average 5. 8 percent this year, up from an April projection of 5.3 percent. The rate should cool in 2012 to 4.6 percent as commodity prices recede but central banks will still need to keep a close watch and may need to take remedial action.

Capital continues to flow into the region, although the pace has eased in recent months, and remains at manageable levels. However, policy makers should be prepared to act in the event of any upsurge in capital volatility once the US and European debt markets settle and advanced economies pick up again.

The report notes that many economies in the region are well placed to cope with soft global economic conditions for a while, provided the major industrial economies do not fall back into recession.

"Ample fiscal space, even after the recent spate of fiscal stimulus measures, and large foreign reserves provide a buffer against further downside risks," said Rhee.

In the longer term, the region must press forward with structural reforms that encourage domestic-led, inclusive growth, as demand from advanced countries is likely to remain subdued.

 

Editor:Zhang Rui |Source: Xinhua

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