| GEO Business|
| ADB forecasts 'robust recovery' for developing Asia|
| Updated at: 0813 PST, Tuesday, April 13, 2010|
HONG KONG: The Asian Development Bank (ADB) said Tuesday Asia's developing economies this year would grow 7.5 percent, with the region on track for a "robust recovery."
Growth was expected to outpace a 5.2 percent rise in 2009, marking a healthy rebound from last year's global economic slowdown, the bank said. For 2011, growth is forecast to slow slightly to 7.3 percent.
The bank's forecast remained below the region's record 9.6 percent expansion in 2007.
"Developing Asia's recovery has taken firm hold and a return to stronger and sustainable growth is now in sight if the region can meet the challenge of strengthening domestic demand," said ADB Chief Economist Jong-Wha Lee.
The region's prospects improved after better-than-expected growth in the second half of 2009, a boost driven by the "strong performances" of the Chinese and Indian economies, the bank said.
"(The region) can look ahead to a robust recovery in the next two years," the bank said.
Fiscal stimulus measures designed to counter the global financial meltdown will likely continue to lure foreign investment, the bank said, while rising incomes and lower unemployment should get consumers spending more, it said.
That spending will likely boost inflation to about four percent this year and again in 2011, up from 1.5 percent in 2009, the bank said.
The Manila-based bank's annual report looks at 44 jurisdictions stretching from the former Soviet states of Central Asia to some Pacific islands, but excludes developed countries such as Japan, Australia and New Zealand.
The region, however, remained at risk if the global economy's recovery slows or the removal of fiscal stimulus measures is not timed properly, the bank said. A spike in international commodity prices could also curtail the region's recovery, it added.
"The region faces several risks, including a slower global recovery, with the outlook for the industrialised economies still somewhat uncertain," it said.
"There is concern that as stimulus measures are unwound, particularly in the major economies, the strength of private demand is not healthy enough to take over."
The region's early recovery is "already attracting potentially volatile capital flows, complicating macroeconomic management," the bank said.
"Asset price trends must be watched and preventative action taken before disruptive asset bubbles materialise," it said.
Rising food prices, which disproportionately affect the poor, also pose a risk, it said.
The report warned that government policy makers must steer their countries through an uncertain environment with a "timely return to sound and responsible fiscal and monetary policies."
"These served the region well when the crisis broke, and authorities need to adapt them appropriately as recovery takes hold and the crisis recedes," it said.
Loosening exchange rate policies may help boost intra-regional trade while authorities across the region must coordinate fiscal, monetary and exchange rate policies to avoid a homegrown financial crisis, the bank said.
"Such adjustments... will enable the region to better adapt to the post-crisis world," it added.
East Asia -- including Hong Kong, China, Korea, and Taiwan -- is forecast to lead the region with an 8.3 percent rise in Gross Domestic Product in 2010, up from 5.9 percent in 2009, the report said.
Southeast Asian economies will grow by 5.1 percent in 2010, up from 1.2 percent in 2009, as countries including Thailand, Cambodia, and Malaysia see an upswing in their exports, the bank said.
India will lead South Asia's 7.4 percent GDP increase this year, the bank said, up from a 6.5 percent rise in 2009.
Central Asia, including Kazakhstan and Georgia, will see 4.7 percent economic growth compared with 2.7 percent last year, the bank said.
Pacific island nations, including Fiji and Papua New Guinea, are expected to see their economies expand 3.7 percent in 2010, outpacing a 2.3 percent rise last year, the report said.