Developing Asia's robust V-shaped recovery from the global crisis is gaining
further momentum, the Asian Development Bank (ADB) says in its annual flagship
Asian Development Outlook 2010 Update, released today.
The report forecasts healthy growth of 8.2% in 2010, well above 5.4% recorded
in 2009 and also above ADB’s earlier forecast of 7.5% in ADO 2010, released in
April. Strong export recovery, robust private demand, and the sustained effects
of stimulus policies allowed the region to experience solid growth in the first
half of 2010. This improved performance is broad-based and is projected to carry
on for the rest of the year.
The region’s two giants continue to perform strongly, lifting up the growth
of the entire region. ADB’s 2010 forecast for the China, where double-digit growth in the first half of 2010 is expected to
moderate somewhat in the second half, remains elevated at 9.6%. ADB’s 2010
forecast for India is slightly upgraded to 8.5% from 8.2% in April.
“Developing Asia’s recovery has led the world. The speed and strength of
the region's rebound continues to surprise on the upside, allowing ADB to
upgrade its 2010 growth forecasts for each of the sub-regions. The V-shaped
recovery has laid the foundation for sustained growth beyond the short term,”
says ADB Chief Economist Jong-Wha Lee.
Despite the region’s vigorous rebound, inflationary pressures remain
manageable. In fact, inflation is forecast to be generally within the central
banks’ comfort zones, at 4.1% for 2010 and 3.9% for 2011.
The update says the one big cloud hanging over the region’s otherwise sunny
short-term horizon is the continued fragility and uncertainty of recovery in the
industrialized countries. While these countries have performed better than
expected in the first quarter, their growth momentum slowed down noticeably in
the second quarter. The threat of another contraction in industrialized
countries still remains, although the likelihood is small.
This risk from the industrialized countries is a major reason why ADB is
maintaining its 2011 growth forecast at 7.3%, which marks a moderation from the
8.2% of 2010. Additional factors for the moderation are the gradual withdrawal
of the fiscal and monetary stimulus, and the end of the low-base effect due to
the slump. It remains to be seen whether private domestic demand will be strong
enough to support growth as fiscal and monetary policy is normalized.
At a broader level, as developing Asia’s recovery progresses, the ADB says
policymakers must turn their focus from managing short-term output fluctuations
to ensuring strong medium- and long-term growth. Sustaining growth will require
policies that expand the region’s productive capacity through both factor
accumulation and factor productivity.
“The region needs to reset its economic priorities. Government policies
must be tailored to focus on trade, human capital, infrastructure, and financial
development to build the foundation for developing Asia’s next
transformation—one toward sustained economic growth,” says Dr. Lee.
Aggregate growth in East Asia is now projected to rise to 8.6% in 2010,
largely owing to stronger than expected recoveries in the highly open economies
of Hong Kong; the Republic of Korea; and Taiwan. The three economies have
bounced back in tandem with the recovery of global trade. The sub-region’s solid
performance is underpinned by the exceptional robustness and resilience of the
Southeast Asia’s bigger economies – Indonesia, Malaysia, Philippines,
Singapore, and Thailand – - have rebounded from last year’s weakness at a much
stronger pace than was foreseen in April. The growth spurt was sparked by a
sharp upturn in exports, which fueled recoveries in consumption and private
investment. Aggregate growth for the 10 sub-regional economies this year is now
forecast at 7.4%.
South Asia’s growth forecast has been lifted to 7.8% from April’s forecast of
7.4%, mainly owing to stronger domestic demand conditions as consumer and
business confidence is on the rise. India is experiencing a surge in economic
activity, prompting the central bank to tighten its monetary stance in a series
of policy adjustments since January to forestall overheating. While most
economies of the sub-region are expanding faster than earlier expected, the
devastating floods in Pakistan will negatively impact on every sector of the
economy. ADB forecasts growth for Pakistan to fall to 2.5% in FY 2011, down from
4.1% in FY2010.
Growth across Central Asia has revived because of higher oil prices and
economic recovery in the Russian Federation, the region’s major trade and
financial partner. Macroeconomic policies and reform efforts have generally been
both effective and sustained. Sub-regional growth forecast for 2010 is now
nudged up to 5.1% from the April forecast of 4.7%.
Asian Development Outlook and Asian Development Outlook Update
are ADB’s flagship economic reports analyzing the economic conditions and
prospects in Asia and the Pacific, and are issued in April and September,