Asian outlook clouded by fragile global recovery: ADB
WASHINGTON: Asia may be leading the world's recovery from recession but its growth prospects are still clouded by the fragile global economic situation, the Asian Development Bank's top economist said.
The bank has projected "very optimistic" rates of growth in 2010 for the region but they could be dampened by a weak global recovery, especially in the industrialized nations, and premature government strategies to exit from recession, chief economist Lee Jong-Wha said at a forum in Washington.
"The question is whether recovery will be sustained in 2010 and beyond... The outlook still remains uncertain, especially the downside risks which may come from a protracted global slowdown and which will delay the region's full recovery," he said.
The Manila-based ADB had recently forecast that developing Asian economies, led by China and India, will grow by an average 6.4 percent in 2010 from about 3.9 percent this year.
"So, even though we are now leading the recovery, there is no room for complacency because global recovery seems to be in the near term very weak," said Lee, a Harvard-educated South Korean who is chief spokesperson for ADB on economic forecasts and trends.
While Asia had proved to be more resilient that other regions in confronting the worst global recession in decades, its fortunates remain tied to the industrial world, a key export market, Lee said.
"Asia's increased export-orientation raises its vulnerability to external shocks. Although there have been lot of dicussions about recovery, in reality the Asian countries have not decoupled from the industrial countries.
"So Asia cannot be the sole driver of its own growth and we still rely on external demand," he added at the forum organized by the Peterson Institute for International Economics.
Michael Mussa, an economist at the institute, said he did not expect most of the world to be mired in recession or in extremely sluggish growth, including the United States where most data point to economic growth in the third quarter after nearly two years in recession.
"The 'V' shaped recovery is alive and well in emerging Asia," said the former International Monetary Fund chief economist, predicting a strong upturn in regional growth.
Top growth driver China snapped back from close to zero growth at the end of last year to already about eight percent growth in first quarter this year while at least half a dozen other economies in the region posted growth rates of between 10 and 20 percent, Mussa noted.
"My worry, of course, is that the initial bounce back from an extremely sharp downturn in world trade and industrial production will not continue at a 10 to 20 percent rate quarter-on-quarter for the next three or four years," Mussa said.
The ADB's Lee warned governments against prematurely winding down their stimulus measures or tightening monetary policies as this could derail the fragile recovery.
"Any hasty tightening of the monetary and fiscal polices will easily disrupt this ongoing recovery, especially in the situation of a weak recovery of the global economy," he said.
"The timing of withdrawing monetary stimulus is very important for industrialized countries but also for Asian countries."