Vivian Wai-yin Kwok,
Forbes
HONG KONG - The torrid pace of growth of Asia’s developing economies is likely to slow slightly to a more sustainable rate over the next two years, the Asian Development Bank said in an annual forecast released Tuesday.
The ADB projects that the 43 economies in Asia excluding Japan will grow 7.6% in 2007 and 7.7% in 2008, down from 8.3% in 2006.
The Manila-based bank expects growth in global export volumes to ease to 7.5% this year from 9.7% in 2006 as slowdowns in the U.S. and Europe reduce demand for Asian manufactures. However, rising consumer spending across Asia will fill the gap, the bank projects.
With inflation in the 43 Asian countries expected to moderate to 3% in 2007 from 3.4% last year, the bank said its projections imply that “growth will move onto a more sustainable footing and that overheating pressures that surfaced in 2006 will gradually abate.”
Last year, Asian economies posted their strongest aggregate numbers of the past decade, with powerhouses China and India driving 70% of the robust growth.
With a 24% surge in fixed asset investment, China reported a 10.7% increase in its gross domestic product in 2006. In India, vibrant industrial development supported by buoyant services helped the economy expand 9.2%.
However, the Chinese and Indian governments are trying to throttle back on growth to prevent overheating.
The Chinese government is aiming for annual growth of 7.5% in its 11th five-year plan from 2006 to 2011. Assuming the authorities keep the fiscal deficit below 1% of GDP while the central bank continues to raise interest rates and banks’ reserve ratio requirements, the Asian Development Bank believes China will slow growth to 10% in 2007 and 9.8% in 2008, despite the boost to domestic consumption and exports expected from the 2008 Olympic Games.
In India, with economic growth at an eight-year high, an overheating property sector and rapid credit growth has led inflation to surge to over 6%. The central bank has hiked interest rates and moved to restrain property lending.
On the assumption that the Indian government will further tighten monetary policy and permit a modest appreciation of the rupee in 2007, the ADB forecasts that construction and housing lending will ease and the country’s economic expansion will moderate to 8% in 2007 and 8.3% in 2008.
In response to tightening measures in China and India, the report estimates that inflationary pressures will wane in 2007 in the region along with the recent slide in global oil prices. Current account surpluses will also start to slowly narrow as growth gently decelerates in developed economies, according to the ADB, which was set up in 1966 to promote economic development in the Asia-Pacific region through loans and technical assistance.
“Prudent macroeconomic management will ensure that developing Asia’s economic outlook will remain favorable,” Ifzal Ali, ADB’s chief economist, said in a statement.
The bank projects that economies in Southeast Asia — including Indonesia, Cambodia, Laos and Vietnam — will grow at a 5.6% pace in 2007 and 5.9% in 2008.
Economic prospects for some countries in the region are expected to remain uncertain as they grapple with downside political risks. The Thai economy could be sluggish due to the impact of capital controls introduced in December.
The bank sees stock market volatility as a threat to the region’s prosperity. “The recent volatility in global equity markets is a timely reminder of looming risks,” said Ali. “If asset values crumble, then developing Asia may have to bear disproportionately high costs.”
The probability of a number of downside risks for developing Asia have declined since the second half of 2006, the bank said, including price volatility, oil supply disruption, protectionism, geopolitical security problems and an avian flu pandemic.
The ADB projects that the 43 economies in Asia excluding Japan will grow 7.6% in 2007 and 7.7% in 2008, down from 8.3% in 2006.
The Manila-based bank expects growth in global export volumes to ease to 7.5% this year from 9.7% in 2006 as slowdowns in the U.S. and Europe reduce demand for Asian manufactures. However, rising consumer spending across Asia will fill the gap, the bank projects.
With inflation in the 43 Asian countries expected to moderate to 3% in 2007 from 3.4% last year, the bank said its projections imply that “growth will move onto a more sustainable footing and that overheating pressures that surfaced in 2006 will gradually abate.”
Last year, Asian economies posted their strongest aggregate numbers of the past decade, with powerhouses China and India driving 70% of the robust growth.
With a 24% surge in fixed asset investment, China reported a 10.7% increase in its gross domestic product in 2006. In India, vibrant industrial development supported by buoyant services helped the economy expand 9.2%.
However, the Chinese and Indian governments are trying to throttle back on growth to prevent overheating.
The Chinese government is aiming for annual growth of 7.5% in its 11th five-year plan from 2006 to 2011. Assuming the authorities keep the fiscal deficit below 1% of GDP while the central bank continues to raise interest rates and banks’ reserve ratio requirements, the Asian Development Bank believes China will slow growth to 10% in 2007 and 9.8% in 2008, despite the boost to domestic consumption and exports expected from the 2008 Olympic Games.
In India, with economic growth at an eight-year high, an overheating property sector and rapid credit growth has led inflation to surge to over 6%. The central bank has hiked interest rates and moved to restrain property lending.
On the assumption that the Indian government will further tighten monetary policy and permit a modest appreciation of the rupee in 2007, the ADB forecasts that construction and housing lending will ease and the country’s economic expansion will moderate to 8% in 2007 and 8.3% in 2008.
In response to tightening measures in China and India, the report estimates that inflationary pressures will wane in 2007 in the region along with the recent slide in global oil prices. Current account surpluses will also start to slowly narrow as growth gently decelerates in developed economies, according to the ADB, which was set up in 1966 to promote economic development in the Asia-Pacific region through loans and technical assistance.
“Prudent macroeconomic management will ensure that developing Asia’s economic outlook will remain favorable,” Ifzal Ali, ADB’s chief economist, said in a statement.
The bank projects that economies in Southeast Asia — including Indonesia, Cambodia, Laos and Vietnam — will grow at a 5.6% pace in 2007 and 5.9% in 2008.
Economic prospects for some countries in the region are expected to remain uncertain as they grapple with downside political risks. The Thai economy could be sluggish due to the impact of capital controls introduced in December.
The bank sees stock market volatility as a threat to the region’s prosperity. “The recent volatility in global equity markets is a timely reminder of looming risks,” said Ali. “If asset values crumble, then developing Asia may have to bear disproportionately high costs.”
The probability of a number of downside risks for developing Asia have declined since the second half of 2006, the bank said, including price volatility, oil supply disruption, protectionism, geopolitical security problems and an avian flu pandemic.
1 comment:
AH PLEOU CRAZY GRINGOS!
4:26 PM
IT IS ABOUT ECONOMICS BY ABD AND WORLD BANK!
GO TO PLAY GRINGOS AND INDIANS IN YOUR CAGE AND LEAVE POLITICS TO CAMBODIAN INDIDE WHO WILL ALWAYS TAKE CARE THEIR OWN DESTINY!
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