Associated Press

Seoul, April 28:

Economic growth in developing Asia is expected to hit 6.8 per cent this year on brisk interregional trade and consumer spending, the Asian Development Bank (ADB) said today.

The forecast, released in the ADB’s first ever Asian Development Outlook, painted a rosy picture but warned that terrorism, a possible slowdown in China and epidemics such as SARS and bird flu still pose risks. Still, regional economic growth reached a better than expected 6.3 per cent in 2003, despite uncertainties about the Iraq war, high oil prices, the outbreak of the respiratory illness SARS and a slow global recovery, the ADB said.

For 2005, the ADB predicts the region’s developing economies will grow at 6.7 per cent, with China, India, Thailand and Vietnam leading the surge. The regional economy was buoyed by an increase in consumer demand China, Indonesia, Malaysia, the Philippines and Thailand.

“An expanding urban middle class and the relatively young age structure of populations are fundamentally changing consumption behaviour throughout developing Asia,” ADB chief economist Ifzal Ali said, “Confidence is high in the economic outlook of the region.” But the ADB warned, however, that an ‘abrupt slowdown’ in China’s ability to contain the overheating of investment in the country could slow intraregional trade and undercut growth. The 63-member Asian Development Bank is a Manila-based financial institution that provides loans and technical economic assistance to the region. Today’s forecast did not include Japan. The ADB holds its annual meeting in mid-May on the South Korean resort island of Jeju.

However, successful monetary and financial cooperation in Asia will rely on sound domestic monetary policies and the healthy financial systems of individual countries, Liqun Jin, vice-president of ADB, told the Boao Forum.

Clear measures

•Establishing a regional policy dialogue unit and a regional surveillance group to make the decisions that will strengthen regional economic monitoring

•Expanding the Chiang Mai Initiative and/or earmarking a percentage of foreign exchange reserves in order to meet the short-term liquidity needs of the member countries, thereby establishing a centralised reserve pool in the medium term

•Developing common indicative templates on mechanisms for financial sector restructuring and harmonization. — HNS

Indian economic growth to continue

NEW DELHI: An upswing in India’s economy is expected to continue for the next two years to notch over seven per cent growth, an Asian Development Bank (ADB) report stated today.

“An upswing in India’s current business cycle is riding on an underlying long-term growth path, which is also accelerating,”states the ADB’s Asian Development Outlook 2004 (ADO) released today.

This trend is expected to push overall growth to 7.4 per cent in 2004 and 7.6 per cent in 2005,” states the ADO-2004 report. The ADB optimism about continuing high growth in India following over eight per cent growth in the 2003-04 fiscal is pegged on a strong market and comfortable balance of payments position.

“This forecast assumes that sound macroeconomic fundamentals will be maintained, including the expected initiation of a serious fiscal consolidation effort following elections in May, that business sentiment will continue to strengthen inside and outside the country; and that there will be normal monsoons during the period,” the report states. — HNS

Cut govt spending

SHANGHAI: China has ordered some industries to rely less on bank financing as it seeks to stem an investment boom that it says is straining the economy. Meanwhile, the Asian Development Bank (ADB) warned that the government may need to curb its own spending to help cool the economy. In a report issued today, it forecast that China’s economic growth will slow to 8.3 per cent this year - down from 9.1 per cent in 2003, but well above China’s official seven per cent target. — AP