MANILA, July 22 (AFP): The Asian Development Bank (ADB) said today it has cut its 2009 growth forecast for the region's developing economies to 7.6 per cent, citing tighter credit and soaring food and energy costs.
The bank trimmed its previous growth forecast made in April of 7.8 per cent, and said actual growth could be slowed even more if either inflation or the US economic slowdown is worse than expected.
It maintained the 2008 growth forecast for the region at 7.6 per cent.
It strongly urged a "more decisive tightening of monetary policies" to fight the scourge of inflation and prevent it eating away the fruits of speedy economic growth.
It noted that many governments were "behind the curve" on the issue, even with "second-round price effects beginning to burrow through the region's economies."
While GDP growth in developing Asia in the first three months of the year was stronger than expected, it eased in the second quarter as slower growth in industrialised nations began to affect the region, the bank said.
The region's developing nations should weather the storm "relatively well," the ADB said, adding that central bankers were faced with a dilemma in trying to keep inflation in check without depressing the economy.
As it has in the past, the bank said Asian nations should allow their currencies to appreciate faster to help contain price pressures.
Meanwhile, the era of cheap food for Asia is over as surging demand, supply problems and the growing production of biofuels will keep food prices high, the ADB warned today.
In its latest Asia Economic Monitor report, the Manila-based lender warned that while previous food price surges were "cyclical and temporary," the higher prices now being seen were caused by permanent changes.
"This time, the impetus appears to come from persistently rising demand ... primarily from rapidly-growing emerging market economies, suggesting that there is a structural and permanent trend at work," the report said.
The ADB cited the average 7.4 per cent growth in gross domestic product (GDP) in Asia since 2000, saying it had created a "structural shift in demand, particularly for food."
Higher incomes have resulted in increased food consumption and a greater demand for meat, which bolsters the need for grain and feed stock.
This shift comes as agricultural productivity remains low or stagnant, with production unable to meet the demand due to low capitalisation and underinvestment in agricultural research and development, the bank said.
Growing urbanisation has also created competing demands for land and water, while rising energy prices have increased the costs of fertiliser, irrigation and food transport by 30-50 per cent in the past year, it said.
Production of biofuels in Europe and the United States, frequently supported by government subsidies, have also driven up the prices of agricultural commodities such as corn, forcing increased use of substitutes like soybean and palm oil.
The ADB said public hoarding, through export bans and restrictions in China, Thailand and Vietnam, and panic-buying in the Philippines, had contributed to the price pressures.
