OT ~~~ Asia's Developing Economies Seen Slowing
Tuesday March 27, 1:56 am ET
By Hans Greimel, Associated Press Writer
Asia's Developing Economies Seen Slowing Over Next 2 Years From Blistering 2006
TOKYO (AP) -- Asia's developing economies will slow over the next two years, the Asian Development Bank projected Tuesday, but the more moderate pace is seen stabilizing the region and putting it on better footing for solid growth in the future.
Asia's economy excluding Japan is expected to grow by 7.6 percent in 2007 and 7.7 percent in 2008 from a blistering 8.3 percent last year, its fastest growth in more than 10 years, the Manila-based bank said. Both China and India, which together accounted for about 70 percent of last year's expansion, are also forecast to slow.
"Growth in developing Asia will ease gently," ADB chief economist Ifzal Ali, said at a news conference in Tokyo to mark the release of the bank's annual Asian Development Outlook report. "This will ensure that growth will obtain a more sustainable level in the years ahead."
That rosy outlook counters worries that the region's economies -- particularly those in China and India -- are overheating, which could spur higher inflation or a debt crisis if imprudent loans go bad.
Still, the bank warned that while recent turmoil in regional stock markets had subsided, a steep drop in asset prices could stifle future growth.
"Markets have moved to re-price risks, but calm could yet give way to less settled conditions," ADB President Haruhiko Kuroda said in a foreword to the report. "If asset prices get badly punctured and reversals occur, the chill would be widely felt."
Looming risks include another possible increase in oil prices, which would pinch a region that imports most of its energy. A slowdown in the U.S. economy, a key destination for Asian exports, would also hurt the region's growth, which has been largely fueled by exports, the ADB said.
But the bank, which was established in 1966 to provide loans and economic aid to promote development, said a re-emergence of the sort of financial crisis that erupted in 1997 was unlikely.
"Overheating pressures will gradually ease in the years ahead," Ali said. "The kind of instability we had in the past, I don't think will happen again."
The bank raised its projection for Chinese growth to 10 percent this year from an earlier forecast of 9.5 percent -- both down from last year's sizzling 10.7 percent rate -- and warned of the dangers posed by China's rapid investment-led expansion.
"Should investment continue to run at more than 20 percent a year, what has been a source of growth for many years could turn out to be a curse, if it leads to a further buildup in excess capacity and deflation," the report said.
The upward revision was made following China's annual congressional session earlier this month approving a continued focus on raising rural livelihoods and domestic demand. Beijing needs to rebalance the economy so it relies more on domestic consumption and services, instead of exports and investment, the ADB said.
In 2008, China's growth is expected to dip to a still strong 9.8 percent, which would snap five straight years of double-digit growth, the bank said.
India booked a growth rate of 9.2 percent last year, its highest since 1988. But it's seen easing down to 8 percent in 2007 and 8.3 percent the following year.
Southeast Asia, which includes Thailand, Singapore and Malaysia, is projected to slow to 5.6 percent this year and hit 5.9 percent in 2008. Their economies logged 6 percent growth in 2006, the ADB said.
Inflation throughout developing Asia -- a group of 43 countries -- is expected to ease to an average 3.0 percent this year from 3.4 percent last year, before rising back to 3.2 percent in 2008.
"Set against this background, robust growth is again expected in 2007 and 2008," the ADB said.
