Economists at the Asian Development Bank says developing Asian economies will emerge from the global financial crisis ahead of the rest of the world. Heda Bayron reports from Hong Kong.
The regional lender says quick responses by Asian governments to the global crisis prevented a steep fall in overall growth. Asian exports suffered a sharp drop because of the recession in North America, Europe and Japan. But the Asian Development Bank says government spending, tax cuts and loose credit have boosted consumption and investment in Asia.
Lee Jong-wha, the ADB's chief economist, says the bank has revised this year's forecast for average economic growth among Asia's developing nations to 3.9 percent from 3.4 percent.
"The region has proven more resilient than we earlier thought. Economic expansion in developing Asia is continuing despite the global recession…. Developing Asia is set to emerge from the global slump ahead of the rest of the world."
The ADB made the revision because of stronger than expected growth in East Asia and South Asia, driven by China and India.
But Lee warns the recovery could still stall. Among the risks are high oil prices and a prolonged recession in industrialized nations. Plus, governments could damage growth by badly timing the end to their stimulus efforts.
"This is a very delicate time for Asian economies. We need to avoid pulling back stimulus too early before the recovery takes hold…. But also, leaving all stimulus packages in place too long would threaten fiscal sustainability, or lead to another round of inflation."
South Asia is expected to grow 5.6 percent this year, higher than the earlier forecast of 4.8 percent. The economies of Bangladesh and India are expected to expand by six percent this year.
China's economy will grow by more than eight percent this year, up from an earlier forecast of seven percent.
The bank says average growth among 10 Southeast Asian economies will be near zero this year. Continued expansion in Indonesia and Vietnam will be canceled out by contractions in Singapore, Thailand and Malaysia. But next year, Southeast Asia is expected to expand more than four percent.
Lee says the region needs to find an alternative to its export-reliant growth model because demand from industrialized countries will not pick up significantly soon. He says Asian consumption levels have yet to reach a point where domestic sales can compensate for the slowdown in overseas demand