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Asian economies to rebound but recovery fragile: ADB

09 april 2013, 17:44
Photo courtesy of graduateinstitute.ch
Photo courtesy of graduateinstitute.ch
The Asian Development Bank said Tuesday the region's emerging economies would pick up this year but warned that the recovery remained fragile due to the eurozone crisis and tensions in Asia, AFP reports.

The Manila-based lender said in its latest forecast that the uptick in China's economy and "robust growth" in Southeast Asia would lead expansion, which would be also boosted by strong domestic consumption.

The ADB estimated that gross domestic product (GDP) for developing Asia, which covers 45 nations, was set to grow 6.6 percent this year before edging up to 6.7 percent in 2014.

Growth slowed to 6.1 percent last year -- the lowest since 2009 when it saw 6.0 percent expansion.

"Developing Asia's recovery phase remains vulnerable to shocks," the bank said in its Asian Development Outlook report.

"Strong capital inflows could feed asset bubbles. Political discord surrounding fiscal debates in the United States, austerity fatigue in the euro area, and border disputes in Asia could jeopardise macroeconomic stability."

"Continued sluggishness in the United States, euro area, and Japan suggests that developing Asia must continue to shift toward more domestic demand and trade with emerging markets," the ADB said.

The ADB forecast China's economy to expand 8.2 percent this year, up from 7.8 percent last year, thanks to strong domestic demand and a better export performance.

South Asia's growth would turn around after two years of softening, it said, with India tipped to see GDP rise 6.0 percent this year from last year's 5.0 percent.

"India has considerable potential, but its future performance relies on resolving contentious structural and policy issues that inhibit investment," the bank said.

The stronger economic activity expected for this year however would spur renewed price pressure, with inflation expected to rise from 3.7 percent in 2012 to 4.0 percent this year and 4.2 percent next year.

"These pressures remain manageable for now, but will need to be monitored closely, especially as strong capital inflows raise the spectre of potential asset market bubbles," the report said.

Southeast Asia would continue to shine on robust private consumption and increased intra-regional trade. Its GDP is set to expand 5.4 percent this year.

An ambitious plan by the Association of Southeast Asian Nations regional bloc to create a common, barrier-free market by 2015 would encourage even higher growth and help to diversify its market, the ADB report noted.

The bank also warned that Asia's growth ambitions could be jeopardised unless the region secures enough supply of clean and affordable energy to support its rapid expansion.

Asia's consumption in energy could rise from barely a third in 2010 to more than half by 2035, when the high polluting coal consumption is set to rise by a whopping 81 percent.

ADB said the region could face "costly and devastating environmental impacts" unless radical changes to the way it uses energy is carried out.

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