REPORT
With inflation being carefully managed at present:
Developing Asia on firm rebound - ADB
Developing Asia will continue to expand solidly over the next two
years, even as inflation, geopolitical uncertainties and the need to
develop new sources of growth present looming challenges to policy
makers, the Asian Development Bank (ADB) said in a new major report.
ADB's flagship annual economic publication, Asian Development Outlook
2011 (ADO 2011), released today, forecasts regional GDP growth of 7.8
percent in 2011 and 7.7 percent the following year.
The projected growth rates are lower than the 9 percent posted in
2010, but show that the region continues its firm recovery from the
global economic crisis.
"Developing Asia, having shown resilience throughout the global
recession, is now consolidating its recovery and rapid expansion in the
region's two gaints-the People's Republic of China (PRC) and India -
will continue to lift regional and global growth," ADB's Chief Economist
Changyong Rhee said.
At the same time, rising food and oil prices, stoked by upheaval in
the Middle East and North Africa, along with the recent emergency in
Japan, present a potential threat to sustained, inclusive growth.
Inflation will need to be carefully managed using a mix of policy
measures, including more flexible exchange rate management and
coordinated capital controls, rather than simply relying on tighter
monetary policy, the report says.
After expanding at 4.4 percent in 2010, consumer prices are set to
accelerate further to 5.3 percent in 2011 before easing back slightly to
4.6 percent in 2012.
"Developing Asia is home to two-thirds of the world's poor and it is
they who are most vulnerable to the effects of price increases," Rhee
said. "Policy makers must therefore consider preemptive action to
control inflation before it accelerates." In the longer run, developing
Asia will have to forge stronger links with non-traditional markets to
maintain growth and to make it more inclusive, the report says. It notes
that there is considerable potential to broaden South-South links with
fast growing emerging economies, both within Asia, as well as in Latin
America, Africa and the Middle East.
To do this, however, policy makers will need to remove barriers to
trade and investment within the South, which are currently higher than
those with the industrial world.
East Asia will continue to lead the region's post-crisis recovery
with projected growth of 8.4 percent in 2011 and 8.1 percent in 2012,
although the forecast expansion rates are below the 9.6 percent recorded
in 2010, as the unwinding of fiscal stimulus measures, slower investment
and less heated export growth kick in.
The PRC is expected to post growth of 9.6 percent in 2011, down from
2010's heady 10.3 percent rise, while Hong Kong, China; the Republic of
Korea; and Taipei, China settle back to more sustainable growth of
around 5 percent after a sharp 2010 rebound. Most economies are
tightening monetary policy amid rising commodity prices with inflation
forecast to pick up to 4.3 percent in 2011 from 3.1 percent in 2010.
Southeast Asia's expansion will moderate after an exceptionally
strong recovery in 2010, with growth coming in at 5.5 percent for 2011
and 5.7 percent in 2012.
The figures are well below the 7.8 percent recorded last year, and
reflect a higher base, slower export growth and fiscal and monetary
policy tightening.
Inflation is set to accelerate to 5.1 percent in 2011, from 4.0
percent in 2010, with VietNam likely to post a double digit rate.
With appropriate policy measures, Southeast Asia's average inflation
is expected to come down to 4.2 percent in 2012.
South Asia will maintain its recent robust economic performance with
forecast growth of 7.5 percent in 2011 and 8.1 percent in 2012,
following a 7.9 percent expansion in 2010.
India's 2010 performance was particularly strong and broad-based,
even with fiscal consolidation and monetary tightening, and the economy
is set to strengthen further to post 8.2 percent growth in 2011 and 8.8
percent in 2012.
Pakistan's devastating floods weighted on its growth performance,
while the end of the conflict in Sri Lanka continued to help underpin
its economic expansion.
Central Asia has been benefiting from higher international prices for
its key commodities including oil and gas, metals, cotton and gold.
Growth is forecast to quicken to 6.7 percent in 2011 and 6.9 percent in
2012, from 6.6 percent in 2010.
Inflation is set to accelerate to 8.2 percent in 2011 from 7.1
percent in 2010, driven by higher food prices in all countries and
higher energy prices in those which import oil.
The resource-rich economies of Papua New Guinea, Timor-Leste and
Solomon Islands will drive growth in the Pacific this year as they
benefit from higher global prices for commodities, new investment and
increased government revenue from mineral resources, the report says.
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