Wednesday April 6, 2005

ADB forecasts strong growth for developing Asia

MANILA, Philippines (AP) - Developing economies in Asia are expected to sustain their robust growth into 2007 as strong domestic demand, regional trade and a steady inflow of investments ease the adverse effects of soaring oil prices and slowdowns in the United States and China, the Asian Development Bank said Wednesday.

Gross domestic product in Asia, excluding Japan, will expand at an average annual rate of between 6.5 percent and 6.9 percent over the next three years, the Manila-based bank said.

For 2005, the ADB forecasts average GDP growth of 6.5 percent, up from its prediction last September of 6.2 percent.

The upbeat assessment stems from momentum generated by the region last year, when GDP growth averaged 7.3 percent - the fastest growth rate since the 1997-1998 Asian financial crisis.

"Nearly all the economies in the region grew by more than 5 percent in 2004,'' ADB chief economist Ifzal Ali said in a statement.

"That is remarkable for an area that is home to about 4 billion people.''

China's economy is expected to grow 8.5 percent in 2005, 8.7 percent next year and 8.9 percent in 2007, following growth of 9.5 percent in 2004, as efforts by Chinese policy makers to cool the largest economy in developing Asia have only a modest impact, the ADB said.

Elsewhere in Asia, the ADB said countries hit by the devastating December tsunami will emerge quickly from the disaster.

The ADB projected a "brisk pace'' for intraregional trade as the rest of developing Asia integrates with China and increasingly with India, and predicted investments would grow at an annual average of 30 percent over the three-year period.

"Even as the pace of the world economic expansion moderates over the next three years, developing Asia will remain a preferred investment location, provided that countries can enhance - or at least, keep - their competitive advantage,'' the ADB said.

The economies of major industrial countries are projected to continue a moderate expansion into 2006 after 3.5 percent growth last year.

Overall, industrial countries are projected to grow at 2.5 percent this year and in 2006.

The ADB said the significant income growth in developing Asia in recent years has boosted consumer confidence and spending.

The main risks for developing Asia remain soaring oil prices, epidemics and terror attacks, as well as the still large external imbalance in the United States and sharp rate increases by the U.S. Federal Reserve, it said.

"The risk of global disruption stemming from large external imbalances in the U.S. has been on the radar for some time, but the timing and impact of the inevitable adjustment process remain uncertain,'' the bank said.

It also projected global oil prices will stay high, with Brent crude expected to average US$41 (euro31) a barrel in 2005 in part because of strong demand in Asia.

Oil prices are forecast to ease to US$39 (euro30) a barrel in 2006 and US$37 (euro28.7) a barrel in 2007, it said.

The outlook said a US$10 (euro7.7) increase in oil prices for one year could shave around 0.8 percentage point off growth in Asia, excluding Japan.

For the full report from the ADB click here

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