Weak global demand will slow down developing Asia in 2012, but growth rates in most developing economies remain robust and should tick back up in 2013, the Asian Development Bank (ADB) says in a new report.
ADB’s flagship annual economic publication, Asian Development Outlook 2012 (ADO 2012), released on April 11, forecasts gross domestic product (GDP) growth in developing Asia at 6.9 percent in 2012—lower than its September forecast of 7.5 percent. GDP is then seen to rise to 7.3 percent in 2013.
GDP expanded by 7.2 percent in 2011 after growing 9.1 percent in 2010, as the region rebounded strongly from the global financial crisis.
“Continued uncertainties in the eurozone and a further slump in global trade pose the biggest threats to the growth outlook,” said Changyong Rhee, ADB chief economist. “At the same time, Asian economies are gradually diversifying into new markets, private consumption is trending up and the region has limited direct financial exposure to the eurozone—which should help sustain its momentum.”
Asia must be ready to respond to any further major shocks in the eurozone which could stall an exports recovery, dry up trade finance, or undermine key global supply chains―where Asia plays an integral role. Most economies in the region have sharply improved finances in the wake of the 2008 global financial crisis and have the capacity to respond to further external weakness.
“There is no clear case for short-term policy responses, but if inflationary pressures build up again and capital inflows resume, there may be a need to readjust monetary policy to maintain price stability,” Rhee said.
Across the region, East Asia will see a deceleration in growth to 7.4 percent this year from 8 percent in 2011, weighed down by weaker exports and investment. China, the world’s second largest economy, will lead the way with growth set to moderate to 8.5 percent and 8.7 percent for 2012 and 2013, down from 9.2 percent in 2011.
South Asia will also remain subdued with growth of 6.6 percent in 2012, tempered by weak demand and fiscal limitations. The pace of expansion will accelerate to 7.1 percent the following year, driven by the Indian economy, which is projected to rise to 7.5 percent.
Southeast Asia will see growth quicken, with GDP expanding to 5.2 percent in 2012 from just 4.6 percent in 2011, on the back of the continued recovery in the Thai economy.
Central Asia will see little change in economic activity for 2012, with projected growth of 6.1 percent reflecting the weak conditions in the eurozone and sluggish growth in the Russian Federation. Growth in the Pacific is set to moderate to 6 percent in 2012 and 4.1 percent in 2013, as Papua New Guinea, the largest economy in the region, sees a winding down of infrastructure projects that stimulated growth in 2011.
Photo: bfick
