ADB Raises 2007 Growth Forecast For Asia To 8.3%

Source : The Business Times, September 17, 2007

MANILA - Asia's developing economies, the fastest growing nations in the world, will expand much more this year than previously expected, but a credit crunch in the West may take a toll in 2008, the Asian Development Bank (ADB) said on Monday.

The Manila-based multilateral agency said growth in Asia, excluding Japan, should average 8.3 per cent in 2007, up from a forecast of 7.6 per cent just six months ago. The region grew 8.5 per cent last year.

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ADB Asian Development Outlook 2007

The ADB forecast growth of 8.2 per cent in 2008, up from an earlier prediction of 7.7 per cent, but left open the possibility of downward revisions amid concerns of overspill into other markets from recent losses in the US subprime mortgage sector.

'It is still early days and events in credit markets and the broader economy have become more difficult to predict,' it said in its updated annual economic outlook. 'It is not clear whether the storm has blown itself out or merely paused. It would certainly be rash to assume that growth in developing Asia, particularly in 2008, would be immune to these unfolding processes.'

But the ADB also said Asia was in a strong position to withstand external shocks, including a recession in the United States, the main market for its export-led economies.

'If a recession of recent median depth and duration occurred in the United States - an event that has a low but rising possibility - a deceleration of growth in developing Asia by 2.0 percentage points would be at the upper end of plausible estimates,' it said, adding that a 1.0 percentage point slowdown was more likely.

'This could possibly prune growth to a range of 6-7 per cent from a baseline prediction of 8.2 per cent in 2008.'

The ADB said growth in the region this year will be spearheaded by rapid expansion in China and India, which together account for about 55 per cent of regional GDP.

It forecast growth in China at 11.2 per cent in 2007, up from its March forecast of 10 per cent, and at 10.8 per cent in 2008.

India's economy will expand 8.5 per cent in 2007, up from the previous forecast of 8.0 per cent, and grow another 8.5 per cent in 2008. -- REUTERS