ADB raises growth forecast for Asia but warns of risks

The Asian Development Bank (ADB) revised its 2002 economic growth forecast for developing Asia slightly upwards yesterday but cautioned the region is vulnerable due to the global economy.

The Manila-based bank said growth in the region’s 41 developing economies was expected to strengthen from an average of 3.7 percent in 2001 to 5.0 percent in 2002 — up slightly from 4.8 percent forecast last April.

For 2003, however, the ADB revised slightly downwards the region’s growth forecast from 5.8 percent to 5.7 percent as expansion in external and domestic demand is expected to moderate.

"Although (the) ADB expects the developing Asian recovery to continue to strengthen over 2002-2003, short-term uncertainty about the sustainability of the world economic expansion is tempering enthusiasm," the bank said in a report.

The most significant risk it cited was weakening external demand if the US recovery stalled and the world economy slipped back into recession.

Other risks include financial sector weakness, threat of price deflation following a global trend of low and falling inflation and oil price spikes.

They "are amplifying the risk of a return to world economic recession" and "developing Asia’s recovery is vulnerable to such an event," the ADB said.

The bank pointed out the enhanced 2002 outlook for developing Asia was not uniform across the region.

"While export performance has generally improved, the impact has been offset by adverse weather conditions in South Asia, reinforced by strong investment growth in Central Asia, and strengthened by relatively robust consumption expansion in East Asia and Southeast Asia," it said.

In Southeast Asia, most economies were growing faster than anticipated despite a slower than expected recovery in exports and with investments showing only limited signs of recovery.

Most of the growth appeared to be driven by public and private consumption expansion.

The ADB said Southeast Asia should experience moderate strengthening of economic growth in 2003 amid increasing investments.

However, South Asia’s economic outlook for 2003 had deteriorated somewhat, primarily because of the lingering effects of adverse weather conditions and a more subdued outlook for external demand, it said. – AFP, Ted Torres