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| Sunday, 10 April 2005 |
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ADB forecasts 6.5% Asian growth in 2005 Growth in developing Asian economies is expected to slow slightly over the next three years after reaching an aggregate 7.3 per cent in 2004, its highest level since the Asian financial crisis of 1997-98, the Asian Development Bank said on Wednesday. "There will be some moderation in growth since the cycle probably peaked in 2004," Haruhiko Kuroda, the new ADB president, said in his foreword to the bank's latest Annual Development Outlook. The report, which covers four billion people in 42 Asian and Pacific economies including China and India but excluding developed nations such as Japan and Australia, predicted annual gross domestic product growth of 6.5 per cent this year and 6.6 per cent in 2006, rising again to 6.9 per cent in 2007. Although demand for Asian exports from the industrialised world might subside, intra-regional trade, much of it centred on China, was likely to take up the slack. With the exception of the Pacific island states, nearly all economies in the region grew by more than 5 per cent last year. "Economic prospects for developing Asia remain auspicious over the next three years," the report said. Asian growth was underpinned by a "highly favourable" external environment in the form of demand for Asian goods from the US and other industrialised countries, and by buoyant domestic demand. Business investment was robust in many economies, especially in south Asia and the oil and gas exporting nations of central Asia. In a separate, technical chapter on the merits of export-led versus domestic demand-led growth, the ADB poured cold water on recent rhetoric from countries such as Thailand about the significance of their policies to boost domestic demand. Examining three decades of statistics, the bank concluded that in the past few years only the export sector had fuelled growth in South Korea and Thailand. It said there was no evidence that export-led strategies contributed to the Asian crisis and noted that the pre-crisis period was marked by over-expansion in domestic demand and a deterioration of net exports. Sustained expansion needed growth in both exports and domestic demand, the ADB said. However, in the main body of their report, ADB economists conceded that domestic demand would play a bigger role in supporting economic growth in the three years to 2007. Turning to global financial imbalances, the ADB said the foreign exchange reserves of the Asian countries surveyed had reached an estimated $1,624 billion, with most of the recent increase coming from China. Aggregate current account surpluses, at 3.7 per cent of GDP, remained high last year, but fell from 4.3 per cent in 2003. With oil prices high and imports surging, the surpluses were expected to decline further to 2.6 per cent this year and 1.6 per cent in 2007. The ADB forecast a soft landing for China, with growth falling to 8.5 per cent this year from 9.5 per cent in 2004. Courtesy: Financial Times |
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