The Asian Development Bank (ADB) raised its 2005 regional growth forecast on Thursday, partly in response to China's rapid expansion, but it said high oil prices were starting to impact many developing countries.
The Manila-based bank raised its growth forecast for Asia, excluding Japan, to 6.6 percent from 6.5 percent.
But it cut its growth forecasts for a number of countries, particularly in Southeast Asia, compared with projections in its annual outlook in April, mainly due to oil prices.
The growth prospects next year and beyond were likely to depend on how countries responded to surging oil prices, which topped a record $70 a barrel last week.
"We are already witnessing major strains in many of our developing countries," ADB Chief Economist Ifzal Ali told a news conference.
"We are seeing a huge increase in all import bills. Some of them are beginning to feel pressure on the external balance of payments. Fiscal strains in India, Indonesia, Bangladesh are particularly huge."
Ali said the risks to growth since its April outlook had become more acute due to the rise in oil prices, a slowdown in US growth rates and tighter US monetary policy. The ADB retained a 6.6 percent growth forecast for 2006.
Asian growth this year was underpinned by better-than-expected economic momentum in China, it said.
South Asia had also "surprised on the upside", with India's growth outlook revised up for next year, the report added.
In addition, it said the global electronics cycle should soon bottom out, which would help key exporters - such as South Korea and Taiwan - next year.
OIL RISKS Rising oil prices could restrain income growth and stoke inflation, it said, noting the region consumed over 20 percent of the world's oil but only produced 11 percent of it.
It estimated oil prices sustained above $70 a barrel for a year would cut economic growth by more than 1 percentage point in a number of developing countries, which were less efficient in their use of energy.
For each unit of gross domestic product, developing Asia requires nearly five times as much energy as Japan, the ADB said.
Some Asian countries had brought in measures aimed at cutting fuel consumption, such as shorter working hours and moves to contain ballooning oil subsidies, although higher taxes on oil products also needed to be considered, it said.
The ADB said there were some arguments for "well targeted and limited subsidies" on oil to help the poor, but suggested subsidies on fuels such as kerosene could be gradually scaled back and fiscal savings earmarked for development projects.
Indonesia has promised to raise domestic fuel prices to cut subsidies after its currency dropped to a four-year low last week.
The ADB said policy makers should not shirk from tightening monetary policy to contain inflation caused by oil prices.
Risks to growth also came from the prospect of further rises in US interest rates, the report said.
The ADB said the region's outlook could be hurt by terror attacks and disease, particularly bird flu, which experts say could mutate into a form that could spread easily between humans.
In 2003, it estimated an outbreak of Severe Acute Respiratory Syndrome (SARS) cost the region about $18 billion in lost income. Defying expectations of a marked slowdown, the ADB ramped up its 2005 Chinese growth forecast to 9.2 percent from 8.5 percent in April, citing strong exports, investment and consumption.
It forecast growth in China would soften slightly to 8.8 percent next year, amid risks from energy costs, weakness in the banking system, overcapacity in some industries and possible pressure on rural incomes.
South Korea is expected to grow 3.6 percent this year, down from an earlier projection of 4.1 percent, hit by cooling exports and weak corporate investment. An upturn in global demand for electronics should help growth rebound to 4.6 percent next year.
India's growth forecast for its fiscal year 2005 was unchanged at 6.9 percent, but next year's growth target was revised up to 6.8 percent from 6.1 percent.
The ADB said oil prices and weaker world trade should help push down growth in Southeast Asia to 5.0 percent this year from a previous forecast of 5.4 percent - led by slower growth in Malaysia, the Philippines, Singapore and Thailand.
Comments
Comments are closed.