The developing Asian economies will register solid growth in 2008 despite slowdown in major industrial economies, surging food and fuel prices, and a simmering credit crisis in the United States, the Asian Development Bank (ADB) said in a report.
ADB's annual publication, 'Asian Development Outlook 2008' (ADO), released on Wednesday, forecast developing Asian economies to expand at 7.6 percent in 2008 and 7.8 percent in 2009. The region posted its highest growth in almost two decades in 2007, averaging 8.7 percent.
The report, however, said that South Asia is expected to lose some steam in 2008, mainly on moderation of growth in India. Pakistan, Bangladesh and Sri Lanka will also be affected by economic deceleration in major markets as garment exports are expected to suffer.
Growth in East Asia is expected to decelerate in 2008 to 8.1 percent from 9.3 percent in 2007. Southeast Asia will slow to 5.7 percent in 2008 from 6.5 percent in 2007, as its exports prospects are likely to be pinched by a slowdown in the global economy.
In Southeast Asia, only Thailand is expected to post higher growth after return to normalcy in politics. Vietnam's economic expansion will moderate as it grapples to keep a lid on inflation.
Growth in Central Asia is expected to decelerate sharply to 7.5 percent in 2008 from double-digit levels in recent years on the back of weaker expansion in the region's largest economy, Kazakhstan.
A sudden halt of capital flows to Kazakh banks has triggered a reduction in lending and downturn in non-oil economy. "Asia will not be immune to the global slowdown, neither will it be hostage to it. It remains tied to global activity through traditional trade channels, and increasingly, through its closer integration in international financial markets," said Asian Development Bank (ADB) Chief Economist Ifzal Ali.
Asian Development Outlook 2008' (ADO) warns that the risk of an inflation spiral in Asia is palpable, and urges policymakers to keep a close watch on it. Despite a slew of administrative measures and subsidies that are reining in price rises, inflation is expected to spike in 2008 and could hit a decade-long regional high, the report said.
Ali says favourable policy conditions and impressive productivity growth associated with Asia's economic modernisation and structural transformation will continue to keep the region on a strong growth path.
Inflation is expected to rise to 5.1 percent in 2008 and gradually slide to 4.6 percent in 2009. Price increases will be highest in Central Asia where it will remain in double digits. Inflation is running at an 11-year high in China, and is a threat to other countries, like Vietnam.
Growth in the region's main economic powerhouses, China and India, is expected to moderate as authorities tighten policies to rein in blistering demand and ease inflationary pressures. China is expected to grow by a solid 10 percent in 2008 and the Indian economy is forecast to expand by 8 percent. slowdown in the economies of the US, European Union and Japan will have more impact on China, which is more open to trade than India.
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