China, India spur growth in developing Asia: ADB

Growth in developing Asian economies should rise more than eight percent this year and next buoyed by strong performances from China and India, the Asian Development Bank said Monday.

In a regional update, it forecast a modest slowing of growth and warned of higher risk factors next year, arising notably from a tightening in credit markets.

"Momentum in (China) and India supports fast growth at the regional level," the Philippines-based lender said, raising the region's gross domestic product (GDP) forecast for this year to 8.3 percent from 7.6 per cent. Next year's growth should be 8.2 per cent, up from the earlier forecast in March of 7.7 per cent, according to an update of its Asian Development Outlook report released here Monday.

Developing Asia, which excludes Japan, grew 8.5 percent last year.

The ADB said this year's updated forecast anticipated a modest slowing of the global economy and a mild recovery in the United States through 2008.

"But the downside risks to growth in 2008 are elevated, and much will depend on whether distress in credit markets deepens and spills over into the wider financial system and real economy," the report said. The bank said regional growth outside China and India would be a more modest 5.7 per cent this year and 5.6 per cent next year.

However, "there is a more general pattern of high and, in some countries, accelerating growth," it noted.

It said the Philippines economy should grow 6.6 per cent this year after it expanded by a near two-decade high of 7.3 per cent in the first half, and that Indonesia was now expected to post GDP growth of above 6.0 per cent. Depending on its timing, severity and duration, a US recession could clip growth in developing Asia by between 1.0 and 2.0 percentage points, it added, but the impact should be "modest and short-lived."

Simultaneous steep downturns in the United States, the European Union and Japan - an event the ADB judges improbable - would put the region at greater risk, although robust reserves and improved financial systems placed it in a better position to weather the storm.

AFP