ADB raises developing Asia's growth forecast
Wednesday, 19 September 2007
Raphael Minder
ASIA should weather the current credit market turmoil and report higher-than-anticipated growth this year and next, according to the Asian Development Bank (ADB).
The ADB last Monday in its Asian Development Outlook 2007 Update raised its 2007 growth forecast for Asia excluding Japan to 8.3 per cent from the 7.6 per cent it predicted six months ago. For 2008, it raised its growth forecast to 8.2 per cent from 7.7 per cent.
While China and India, which make up more than half of the developing Asia's economy, will remain the primary engines of growth, the ADB also underlined significant progress in Indonesia and Vietnam.
The ADB is working on the assumption that the credit squeeze will lead to a slowdown in US growth rather than a recession. It said that under its worst-case scenario the impact on Asia would be limited to a reduction in forecast growth of no more than 2.0 percentage points.
Ifzal Ali, ADB chief economist, said: "While a cold in the US will lead to some kind of flu in our part of the world, it is not going to lead to pneumonia. Asia at worst will grow between 6.0 and 7.0 per cent next year, which by any standards is still high."
Concerning China, Mr Ali said the government might have to consider further appreciation of its currency to "dampen the exuberance" and engineer a soft landing of the economy. He said there were "many signals of overheating" in China, ranging from soaring food prices to the booming real estate market.
In south-east Asia, Vietnam is the only country facing inflationary problems, but according to Mr Ali that is because it is "the stellar performer" in terms of growth.
According to Mr Ali, part of the reasoning behind ADB's prediction that Asia will avoid a serious knock-on effect from the US is that countries such as India remain "basically closed economies". However, he also noted the ADB's optimism is based on current stock market valuations in Asia, where he said price-to-earnings expectations are in line with fundamental corporate performance.
............................
Under syndication
arrangement with FE
ASIA should weather the current credit market turmoil and report higher-than-anticipated growth this year and next, according to the Asian Development Bank (ADB).
The ADB last Monday in its Asian Development Outlook 2007 Update raised its 2007 growth forecast for Asia excluding Japan to 8.3 per cent from the 7.6 per cent it predicted six months ago. For 2008, it raised its growth forecast to 8.2 per cent from 7.7 per cent.
While China and India, which make up more than half of the developing Asia's economy, will remain the primary engines of growth, the ADB also underlined significant progress in Indonesia and Vietnam.
The ADB is working on the assumption that the credit squeeze will lead to a slowdown in US growth rather than a recession. It said that under its worst-case scenario the impact on Asia would be limited to a reduction in forecast growth of no more than 2.0 percentage points.
Ifzal Ali, ADB chief economist, said: "While a cold in the US will lead to some kind of flu in our part of the world, it is not going to lead to pneumonia. Asia at worst will grow between 6.0 and 7.0 per cent next year, which by any standards is still high."
Concerning China, Mr Ali said the government might have to consider further appreciation of its currency to "dampen the exuberance" and engineer a soft landing of the economy. He said there were "many signals of overheating" in China, ranging from soaring food prices to the booming real estate market.
In south-east Asia, Vietnam is the only country facing inflationary problems, but according to Mr Ali that is because it is "the stellar performer" in terms of growth.
According to Mr Ali, part of the reasoning behind ADB's prediction that Asia will avoid a serious knock-on effect from the US is that countries such as India remain "basically closed economies". However, he also noted the ADB's optimism is based on current stock market valuations in Asia, where he said price-to-earnings expectations are in line with fundamental corporate performance.
............................
Under syndication
arrangement with FE