ADB: Asia hit worse than expected

MANILA,Philippines – The Asian Development Bank has scaled down its growth forecasts for the Philippines and the rest of Southeast Asia for this year and the next, saying the impact of the global economic downturn on the region was worse than it initially expected.

In its revised Asian Development Outlook (ADO), the multilateral lender zeroed in on the “overdependence” of developing Asian countries on industrialized nations for exports.

“The main channel by which the global financial crisis and economic slump spread to developing Asia was the collapse of demand in major global markets, hitting the region’s exports,” ADB said in the publication, which it released yesterday.

The Philippines is now seen to grow by only 1.6 percent for this year and by 3.3 percent for next year, down from the original projections of 2.5 percent and 3.5 percent made in March.

Nonetheless, ADB’s growth estimates for the Philippines are still well within the government’s target. According to the administration’s economic team, growth may range from 0.8 to 1.8 percent this year, and 2.6 to 3.6 percent next year.

ADB said its loan assistance to the Philippines this year could reach a much higher amount of $1.3 billion. The money is intended to support the government’s pump-priming programs.

By next year, the multilateral agency’s assistance to the Philippines may go back to the usual annual amount of $600 million as the impact of the global turmoil on the domestic economy is expected to diminish, said Neeraj Jain, ADB country director.

The growth forecast for the Philippines for this year is higher than the outlook for the whole of Southeast Asia. ADB now expects the entire region to grow by an average of only 0.1 percent, down from an earlier projection of 0.7 percent.

However, the revised outlook for the Philippines for next year is below the average projection for the region of 4.3 percent.

The measly growth forecast for the region this year is driven by the expected contractions in the economies of Malaysia (-3.1 percent), Singapore (-5 percent) and Thailand (-3.2 percent). For next year though, all countries in the region are expected to post positive growth.

Although the ADB scaled down its growth forecast for Southeast Asia, it raised the average growth projections for all 44 developing economies in Asia.

ADB said it now expected the economies of developing Asia to grow by 3.9 percent this year, from an earlier projection of 3.4 percent, and 6.4 percent next year, from 6 percent.

The upward revision was led by the rise in projections for China and India. China is seen to grow by a hefty 8.2 percent this year, faster than the earlier forecast of 7 percent, while India is now estimated to grow by 6 percent this year, from an earlier projection of 5 percent.

Joseph Ernest Zveglish, assistant chief economist at the ADB, yesterday said that Asian countries should increase intraregional trade and reduce reliance on exports to industrialized nations, including the United States and those in Europe.

He said balancing exports with industrialized nations and fellow Asian countries would help reduce the impact of volatilities of the global environment on their economies. –Michelle Remo, Philippine Daily Inquirer