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Asia to lead the world economy back into growth

Developing Asia, which excludes Japan, Australia and New Zealand, is set to expand growth by 3.9% in 2009 and 6.4% in 2010, according to the Asian Development Bank (ADB). These growth figures have been raised from the forecast last March of 3.4% and 6.0% respectively.

 

“Despite worsening conditions in the global economic environment, developing Asia is poised to lead the recovery from the worldwide slowdown,” said ADB Chief Economist Jong-Wha Lee.

 

According to the ADB’s newly published Asian Development Outlook (ADO) 2009, there are several reasons for Asia’s enhanced growth prospects. These include: the firm action taken by many governments and central banks in the region; the relatively healthy state of financial systems before the global crisis hit; and, the rapid turnaround in the larger, less export-dependent economies in the region.

 

The expected rapid growth is being led by China and India. The massive fiscal stimulus package and aggressive monetary easing put in place in the People’s Republic of China has led to growth forecasts of 8.2% in 2009 and 8.9% in 2010. Also, the ADB expects India to grow by 6.0% this year as a result of a large fiscal stimulus announced in July and a recovery in business confidence.

 

Other areas in the region are not faring quite so well. Hong Kong and Taipei are expected to shrink sharply due to a severe drop in demand for exports and countries like the Maldives have been hit by a drop in tourism.

 

However, Dr Lee warned that: “The improved regional outlook should not make developing Asian economies complacent. A protracted global slowdown or the hasty withdrawal of stimulus packages can degrade the region’s ongoing recovery.”

 

The ADB warned that if the area was to develop more resilient economies it would have to broaden the scope and structure of its openness. This would include reducing its vulnerability to external shocks by tackling the geographically unbalanced structure of its trade, capital flows and movement of workers.

 

The report concluded that: “By promoting closer economic linkages within the region and a more balanced internal economic structure with a bigger role for domestic demand, policy makers in developing Asia will be able to achieve rapid yet stable growth for the region.”

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Posted in Asia, China, Development, World Trade

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