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Asia to expand faster than expected this year, next, ADB says
Asian economies will expand at a faster-than-expected pace this year and next as growth in China, India and Indonesia strengthens, the Asian Development Bank said.
Asia, excluding Japan, will grow 3.9 percent in 2009, faster than a March estimate of 3.4 percent, the Manila-based institution said in a report Tuesday. Growth may strengthen in 2010 to 6.4 percent, it said.
The region is leading the world’s emergence from its deepest recession since the 1930s after governments boosted spending, cut taxes and slashed interest rates, averting a spiral into another Great Depression. Withdrawing these measures too early may derail the global recovery and lead to a protracted slowdown, the ADB said.
“This is not the time for an exit from expansionary policies -- the recovery remains fragile and subject to serious downside risks,” the ADB said in its Asian Development Outlook 2009 Update. “Once impetus from fiscal stimulus packages wears off, it will be essential that domestic consumption and private investment take over as drivers of growth.”
Confidence in the world economy held at a record high in September after reports suggested the recession is over and officials said they won’t rush to withdraw stimulus, a Bloomberg survey of users on six continents showed September 17.
Export economies
Recovery in Asia also hinges on the revival of growth in Europe and the U., as this will affect the region’s export-dependent economies, the ADB said. Federal Reserve Chairman Ben S. Bernanke said last week the recession in the US has probably ended.
“Any slippage in the major industrial economies’ recovery would delay the region’s return to its long-term growth path,” the ADB said.
Inflation in Asia may average 1.5 percent in 2009 compared with a March forecast of 2.4 percent, the ADB said. It forecast inflation to accelerate to 3.4 percent next year as growth strengthens.
“Central banks in the region will therefore want to put a tight watch on monetary policies so as not to encourage asset bubbles that would inflate prices to levels that are no longer justified by fundamentals,” the ADB said.
South Korea’s financial regulator said earlier this month it will tighten restrictions on mortgages for people buying homes in the capital and surrounding areas to slow the increase in lending. Loans to households in August climbed 3 trillion won (US$2.4 billion) to 405.1 trillion won, according to the Bank of Korea.
China, India
China will expand 8.2 percent this year, compared with the March forecast of 7 percent, the ADB said. India’s economy will grow 6 percent this year, up one percentage point from the earlier estimate, it said.
China’s August industrial production increased 12.3 percent from a year earlier, the most since the same month in 2008, while India’s industrial production increased for a seventh straight month in July. China’s expansion follows a 4 trillion yuan ($586 billion) stimulus package, record lending and a rebound in property investment and sales that have countered a slump in exports.
The ADB forecast Indonesia’s economy will expand 4.3 percent this year, compared with the March estimate of 3.6 percent. South Korea’s economy will shrink 2 percent in 2009, compared with the earlier predicted 3 percent contraction, it said.
In Southeast Asia, the ADB forecasts the economies of Thailand, Malaysia and Singapore will shrink this year, dragging growth in the region to 0.1 percent in 2009. The East Asian economies of Taiwan and Hong Kong will also contract, it said.
Some of the world’s biggest financial companies including Lehman Brothers Holdings Inc. collapsed as banks and other financial institutions reported about $1.6 trillion of writedowns and losses since the start of 2007. Asian banking systems “have not buckled under the strain of the crisis of confidence and there are signs that lending is reviving,” the ADB said.
thanhnien, Bloomberg
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