The Star 29 September 2010
KUALA LUMPUR: The odds of a slower economic growth or even a double-dip recession seem unlikely, according to Asian Development Bank (ADB) president Haruhiko Kuroda.
“The economies of Europe, the United States and Japan have been recovering well.
“Of these economies, the US recovery has been robust, (even) faster than that of Japan,” he told reporters on the sidelines of the two-day symposium that ended yesterday.
Kuroda said the performing economies of developed countries were indicative of the unlikelihood of a double-dip recession. He also said Asian currencies were expected to appreciate further due to the good economic growth of their respective countries.
Kuroda noted that ADB had earlier this week upgraded its forecast on developing Asia to grow 8.2% this year compared with a projection of 7.5% earlier. “In April, we forecast emerging markets in Asia would grow by 7.5%, but now we have upgraded the forecast to 8.2% this year. High growth will continue in the years to come,” he said.
ADB’s forecast, which does not include Japan, covers 44 developing and newly industrialised nations in Asia. In predictions for individual economies, the bank maintained its forecast of 9.6% growth for China, the world’s second biggest
economy. Growth in the southern Chinese financial and legal services hub of
Hong Kong was revised upward to 5.8%. South Korea and Taiwan’s forecast growth was raised to 6% and 7.7% respectively.
India’s anticipated growth was edged up to 8.5% from 8.2% although the bank warned about high inflation in the south Asian nation due to scant monsoon rains in 2009 that suppressed harvests. Meanwhile, ADB in its update of its 2010 Asian Development Outlook said that growth across Asia and the Pacific would be the fastest this
year since 2007 as the region recovered strongly from the global crisis, but would moderate in 2011, Reuters reported in Manila. Forecast growth for the 10 economies of South-East Asia has been revised up to 7.4% in 2010 – the fastest since 1996, before the Asian financial crisis – from 5.1%. “The return of investors’ risk appetite for emerging market assets and the strong economic recovery have combined to bring a surge in capital flows to developing Asia,” the ADB said. Those flows – both portfolio and direct investment – reflected strong fundamentals and confidence in long-term reforms and growth potential, but also carried risks such as potentially destabilising markets and complicating policy setting.
“The prospect of reversal of inflows remains a possibility in the medium term as monetary tightening in the US and the eurozone narrow the interest rate differentials with developing Asia,” the bank said. “Asian authorities should therefore consider appropriate policy measures to manage a surge in capital inflows and to encourage
stable long-term capital flows.” The ADB said Asia would also benefit from greater coordination to overcome fears of losing export competitiveness through unilateral
currency strength. “While price stability must remain the overriding objective of monetary policy, the global crisis highlights the need to prevent asset price bubbles through improved coordination between financial regulation and monetary policy to the region,” it said.
