ADB upgrades economic forecast for Asia as recovery continues

MANILA, Philippines (Xinhua) – The Asian Development Bank (ADB) has upgraded its economic forecast for developing Asia to 7.9 percent from the previous 7.5 percent after first-quarter data showed broad-based growth in the region.

In a special assessment of the region released on Tuesday, the ADB said the growth was driven by buoyant exports, strong private demand, and sustained stimulus policy effects.

But the ADB warns of downside risks in the second half of the year, including uncertain global environment, unpredictable private domestic demand, and the risks of dramatic capital flows and exchange rate fluctuations.

Developing Asia comprises 45 members and covers central, east, south and 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 industrialized and Southeast Asian economies leading the way,” said Jong-Wha Lee, the ADB’s chief economist.

The ADB forecasts East Asia, which comprises China, Republic of Korea, and the regions of Hong Kong and Taiwan, to expand 8.4 percent, slightly higher than the 8.3 percent predicted earlier this year.

Aggregate growth in Southeast Asia is now expected to be 6.7 percent this year, sharply higher than the previous projection of 5.1 percent. First-quarter growth in the five bigger economies in this region (Indonesia, Malaysia, the 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 percent growth this year.

In South Asia, recent economic indicators have been broadly within expectations. The ADB forecasts aggregate growth of 7.5 percent, slightly higher than the April projection of 7.4 percent. India’s growth projection is unchanged at 8.2 percent.

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

Growth in the Pacific island economies is now forecast at 3.8 percent, versus 3.7 percent forecast in April. However, performances vary across economies with weakness in some being balanced by resilience elsewhere.