ADB upgrades forecast for South Asia

The Asian Development Bank (ADB) has upgraded its economic forecast for developing Asia after first-quarter data showed broad-based growth driven by buoyant exports, strong private demand, and sustained stimulus policy effects.

In a special assessment of the region released today, ADB said it now expects South Asian aggregate growth of 7.5 per cent, slightly higher than the April projection of 7.4 per cent.India’s growth projection is unchanged at 8.2 per cent.

Similarly, developing Asia is to grow by an aggregate 7.9 per cent in 2010, up from the 7.5 per cent predicted in its Asian Development Outlook (ADO) 2010 published in April. ADB warns downside risks in the second half of the year including uncertain global environment, unpredictable private domestic demand, and the risks of dramatic capital flows andexchange rate fluctuations. As such, the growth outlook for 2011 is kept unchanged at 7.3 per cent.

Developing Asia comprises 45 member countries of ADB and covers Central Asia, East Asia, South Asia, Southeast Asia and the Pacific.

“The stronger-than-anticipated export rebound and much-improved consumer confidence have helped the region’s economies recover faster than we expected. We are seeing the newly industrialised and Southeast Asian economies leading the way,” said Jong-Wha Lee, ADB’s chief economist.

ADB forecasts East Asia to expand by 8.4 per cent, slightly higher than the 8.3 per cent predicted earlier this year.

Higher investment has helped the latter three economies, as production and consumer spending have started picking up and exports are recovering strongly.

The economic forecast for PRC is maintained at 9.6 per cent. Recent measures to slow credit growth and cool speculation in the property market will likely lead to slower investment in the coming quarters. Industrial output and the purchasing managers’ indexes also suggest a soft landing for the Chinese economy.

Aggregate growth in Southeast Asia is now expected to be 6.7 per cent this year, sharply higher than the previous projection of 5.1 per cent. First-quarter growth in the five bigger economies in this region (Indonesia, Malaysia, Philippines, Singapore and Thailand) exceeded expectations on account of strong exports, robust industrial production, and improved consumer confidence. The subgroup is projected to post 6.8 per cent growth this year.

Improving global conditions as well as higher oil prices have helped the economies in Central Asia so far in 2010. ADB now sees the region’s economy growing at an aggregate 4.8 per cent, up slightly from the ADO’s forecast of 4.7 per cent.

The forecast for growth in the Pacific island economies now stands at 3.8 per cent, versus 3.7 per cent forecast in April. However, performances vary across economies with weakness in some being balanced by resilience elsewhere.

ADB publishes its Asian Development Outlook for developing Asia in March or April and updates those forecasts in the Asian Development Outlook Update in September. It publishes the Asia Economic Monitor, a study of the 14 economies of emerging East Asia in July and December. The Asia Economic Monitor was also released today.