Economies in the Asia-Pacific region will moderate in 2008 due to a slowdown in the United States and the credit crunch, but expansion in the region's developing nations would still be robust, a UN panel said.
The World Bank chimed in, saying slowing growth in the United States and Europe would hit Asia this year, while a day earlier Citigroup had cut its 2008 forecast for Asia's economic growth to 7.6 percent from 8.2 percent. Citigroup cut its growth forecast for China to 9.8 percent in 2008 from previous 10.5 percent, and trimmed India's growth outlook to 7.7 percent from 8.3 percent.
"After the fastest growth in a decade in 2007, the developing economies of the Asia-Pacific region are expected to grow at a slightly slower but still robust 7.7 percent in 2008," the UN Economic and Social Commission for Asia and the Pacific (UNESCAP) said in its annual report on Thursday.
"The region's developed economies are expected to grow at 1.6 percent in 2008, slipping from 2.0 percent in 2007." It said China and India, the region's economic locomotives, are expected to continue growing briskly in 2008, boosting the rest of the region.
Commodity and energy exporting countries like the Russian Federation are expected to add to the momentum, the report added. The UN panel report said food prices are likely to remain high, and they pose a greater inflationary risk in a region where food accounts for a far higher proportion of consumer spending.
It said inflation in the developing economies of the region was projected at 4.6 percent in 2008, down from 5.1 percent the previous year, with currency appreciation cushioning the impact of high oil and food prices.
UNESCAP said the major drags on performance would be the slowdown in the United States, driven by the bursting housing bubble, unfolding of the credit crunch in the US and Europe, the appreciation of currencies in the region against the dollar and high oil and food prices.
"The main impact on the region will come through a downturn in exports. The United States has been cutting interest rates aggressively in response to slower growth, fuelling further depreciation of the dollar," the report said. "Countries in the region will face twin blows: reduced demand and less competitive exports to the United States."
It added that major currencies in the region would rise against the dollar in 2008, driven by the large unwinding of United States' imbalances with the rest of the world and the turmoil in global financial markets.
Turning to India, the panel said the economy could grow 8.5-9.5 percent over the medium term but price pressures may persist due to high global oil and food prices.
"The sustained expansion of the Indian economy would see growth at between 8.5-9.5 percent over the medium term following growth of 8.7 percent in 2007," UNESCAP said. "UNESCAP expects (Indian) inflation at 5 percent for 2008." India's widely watched wholesale price inflation inched close to 6.0 percent in early March, above the central bank's comfort level of 5.0 percent.