ADB forecasts 6.6 pc growth for Asia despite high oil prices
MANILA, PHILIPPINES - Developing Asia's healthy expansion is expected
to continue, with growth projected of 6.6% in both 2005 and 2006,
according to a major report released by the Asian Development Bank (ADB)
yesterday. But the impact of higher oil prices constitutes a major
source of uncertainty.
In 2005, solid performance at regional level masks some important
revisions at country and subregional levels, according to the Asian
Development Outlook 2005 Update (Update), a supplement to ADB's flagship
publication that forecasts economic trends in the region.
The forecast of 6.6% growth for 2005 represents a small upward
revision and next year's projection is unchanged from the projections of
the Asian Development Outlook 2005 (ADO 2005) released in April.
The Update revises up growth projections for the People's Republic of
China (PRC), which carries a large weight in the regional aggregate, for
both 2005 and 2006, and, in 2006, for India, another large regional
economy.
Projections have also been revised up slightly to 6.9% for East Asia
for 2005, driven by the higher than anticipated full-year growth of the
PRC of 9.2%, propelled by rising investment and larger net exports.
For the rest of East Asia, though, growth is revised down to 3.8%,
from the 4.4% foreseen in ADO 2005, due to slower export growth.
Next year's growth projection for East Asia is marginally down from
the ADO 2005 forecast at 6.9%, with a small upward revision for the PRC
offset by downward revisions for the Republic of Korea and Taipei,
China.
Growth in South Asia is on track for 2005, with India continuing to
expand at a brisk pace, Pakistan posting its fastest growth in more than
two decades, and Bangladesh growing steadily.
India's outlook continues to look bullish in 2006, lifting the
subregional average for South Asia to 6.6% compared to the 6.2% forecast
in ADO 2005.
Here, strengthening fundamentals and the impact of large
infrastructure investments are likely to outweigh the negative effect of
high oil prices.
But a variety of factors have dimmed the outlook this year in
Southeast Asia, including poor harvests and high oil prices particularly
hitting Philippines and Thailand, and a slowdown in the global
electronics sector affecting Malaysia and the Philippines.
These negative developments are to some degree offset by continuing
robust growth in Vietnam and an improving investment climate in
Indonesia. But overall, 2005 growth in Southeast Asia has been revised
down to 5.0% from 5.4%.
For 2006, Southeast Asia's economic growth should pick up, but at
5.4%, a slightly slower rate than predicted in ADO 2005. In Thailand,
the factors that held expansion in check (including the affects of the
tsunami) during 2005 should recede.
The global electronics sector should also bottom out and by 2006
begin a new expansionary phase, which would help lift exports and growth
in Malaysia and the Philippines.
So far, Central Asia's net oil exporters have benefited from the
higher oil prices and new production capacity, to the degree that
subregional growth in 2005 is expected to top 9%. With the high oil
prices expected to continue through 2006, the update has revised up
projected growth for next year to 9.4% from 8.8%.
"The overall outlook for developing Asia is more uncertain than
earlier in the year, with some risks now being more accentuated," the
Update says.
As a large net oil importer and a comparatively energy-inefficient
region, Asia is particularly vulnerable to high oil prices. Even net oil
exporters such as Kazakhstan, Papua New Guinea, and Vietnam, also face
challenges when oil prices soar. Across Asia, countries need to adjust
to the possibility that high oil prices are here for some time.
"Oil prices have risen by almost 75% since the beginning of 2005.
Across the region, signs of strain are beginning to show. Failure to
adjust could put prospects at risk." says Ifzal Ali, ADB's Chief
Economist.
Other risks include the possibility that growth might slow in the US
and threats of virulent diseases and terrorist attacks. "Despite all of
this, we continue to be cautiously optimistic on developing Asia," Ali
adds.
"The healthy expansion is expected to continue drawing on strong
internal dynamics, particularly, growth in the PRC and structural
improvements in South Asia." - (ADB) |