ADB cuts growth forecast for developing Asia

Hong Kong (ANTARA News) - The Asian Development Bank (ADB) said Tuesday that growth in Asia's developing economies this year would fall to 3.4 percent, citing the "bleak" short-term outlook for the region.

Growth will drop from 6.3 percent last year and 9.5 percent in 2007, the bank said, with 2010 expected to see a 6.0 percent expansion.

The slowdown will mean more than 60 million people in the region will remain mired in poverty, the bank said in its annual Asian Development Outlook report.

"The short-term outlook for the region is bleak as the full impact of the severe recession in industrialised economies is transmitted to emerging markets," said ADB acting chief economist Jong-Wha Lee.

The bank was predicting as recently as December that the region's developing economies would grow at 5.8 percent, highlighting how the crisis has rapidly spread across the region as demand for exports vanishes.

The figure is below China's official growth target of 8.0 percent, seen as the minimum required to prevent mass joblessness that could lead to social unrest in the country of 1.3 billion.

The report looks at the prospects for 44 jurisdictions stretching from the former Soviet states of Central Asia to some of the tiny Pacific islands, excluding developed countries such as Japan, Australia and New Zealand.

Several of the region's most export-dependent economies, including Hong Kong, Taiwan, South Korea, Malaysia, Singapore and Thailand, will contract in 2009, the report said.

Lee told reporters in Hong Kong that he believed the region's economies were currently "close to the worst."

"Eventually Asian (economies) will bottom out in early 2010, and show signs of recovery," he said.

ADB president Haruhiko Kuroda said the region had to fight any knee-jerk reactions that would place extra restrictions on global trade.

"Loud calls for protectionist policies are becoming worrisome," he said in his foreword to the report.

"As job losses in the major industrial countries continue, the protectionists' voices may only get louder."

The bank welcomed the various stimulus packages that have been unveiled to battle the downturn, but said there was a "dearth of information" about how they would be implemented.

Despite the gloom, the report said the region was in a much better position to tackle the slowdown than it was in the 1997 Asian financial crisis, which pummelled the region's currencies and economies.

Robert Prior-Wandesforde, a senior Asia economist at HSBC bank, said the current downturn was as severe as that in 1997 but that the region was expected to rebound more quickly.

"Being fundamentally in reasonably good shape when the region went in and with a lot of policy support to come, we expect (the region's economies) can bounce back sharply," he told AFP.

The ADB report stressed that Asia had to tackle its obsession with savings and shift to a more consumer-driven economic model.

"Strengthening domestic demand requires policies that develop social safety nets to encourage more private consumption," said Kuroda.

South Asia will also struggle in 2009, although it is less reliant on trade. Growth in India will fall to 5 percent this year, down from 7.1 percent in 2008, the report found.

Central Asia, where several countries derive much of their income from oil, will see growth drop to 3.9 percent in 2009, from 5.7 percent in 2008 and 12 percent in 2007.

The Pacific islands, buoyed in recent years by the commodities boom which has stoked growth in Papua New Guinea, will fall to 3.0 percent, the bank said.