Eurozone crisis dampening developing Asia’s growth
Europe's worsening financial and banking crisis and a sluggish
recovery in the United States are weighing on developing Asia's growth
prospects, according to figures released today from the Asian
Development Outlook Supplement (ADOS), published by the Asian
Development Bank (ADB).
“Economic growth in developing Asia moderated during the first half
of 2012 as slower growth in the US and euro area reduced demand for the
region's exports,” the report says. “Worries over the economic strength
of important developing economies have also emerged recently.” ADB's
latest figures predict developing Asia will expand by 6.6% in 2012 and
7.1% in 2013, lower than the 6.9% and 7.3% forecast in ADB's Asian
Development Outlook published in April.
In addition to the impact of Europe's malaise, the region's
development in the first half of the year has been hampered by slower
growth in the two largest economies,” the People's Republic of China (PRC)
and India”as well as the effect of the unwinding of policy stimulus in
some countries.
The PRC has seen a fall in net exports, industrial production, and in
fixed asset investment, although government spending on health,
education and big infrastructure projects should give the economy
something of a boost. As the PRC moves to a more sustainable growth
model, growth may slow down more than expected.
ADB is predicting that gross domestic product in the PRC will
increase by 8.2% in 2012 and 8.5% in 2013. In April, an 8.5% expansion
was forecast for 2012, rising to 8.7% next year. India's outlook,
meanwhile, is clouded by a combination of high inflation and poor
demand, both externally and internally.
Inflation is expected to persist, primarily due to accelerating food
prices.
India’s economy is now expected to grow by 6.5% in 2012, down from
the previous forecast of 7.0%. In 2013, growth should go up to 7.3%,
less than the previously expected 7.5%.
While the weaker global environment is expected to affect growth in
Southeast Asia, domestic demand and reconstruction activities should
keep growth robust. A strong rebound in Thailand, healthy growth in the
Philippines, and increasing consumer demand in Indonesia have helped the
subregion and most governments have sufficient policy space to ease
monetary policy and provide fiscal stimulus if needed. Southeast Asia's
economies are expected to post growth of 5.2% in 2012 and 5.6% in 2013,
virtually unchanged from predictions made in April.
Weaker global demand is helping ease international oil and food
prices, which is reducing inflationary pressures in the region.
Developing Asia's inflation rate should slow to 4.4% in 2012 ”a slight
reduction from the 4.6% forecast in April” and will likely continue at
the same pace next year. |