Asia economies to rebound in 2010 but fears remain: ADB

BANGKOK (AFP): Asian economies will likely bounce back from the global economic slump in 2010 but fears remain over the sustainability of growth if there  is no wider recovery, the Asian Development Bank said Thursday.

The bank’s chief economist Lee Jong-Wha said the outlook for East Asia this year remained “pessimistic” but foresaw a V-shaped recovery led by China if countries continue to focus on stimulating domestic demand.

“We are optimistic for developing Asia for a V-shape recovery…. But the big question is whether it will be sustainable growth — in that part we are rather pessimistic without a full global recovery,” Lee told media ahead of the launch of ADB’s biannual Asia Economic Monitor in Bangkok.

“It will be very difficult to return to the pre-crisis trend of growth,” he added.

Despite an increasing proportion of export demand coming from within Asia, notably China, countries in the region continue to rely on markets in the US, European Union and Japan for 60 percent of final goods exports, Lee said.

Those markets are less likely to recover from the global financial crisis so quickly, he said.

The ADB report recommended a continued focus on loose monetary and fiscal policies to stimulate domestic demand, with support for small enterprises and stimulus packages that must be fast and efficient.

“The issue is how effectively they (Asian governments) can mobilise these additional fiscal resources,” Lee said.

The report showed that the pace of capital outflows from Asia had slowed in the first quarter of 2009, and Lee urged large Asian investors to focus more of their capital spending within the region.

While China’s recovery has “gained traction” and the more closed smaller economies such as Indonesia are on course to stronger growth levels, Lee said concern remained for more export-dependent small regional economies such as Hong Kong, Singapore, Malaysia and Thailand.

The Manila-based bank said earlier this month it would update on September 22 its flagship Asian Development Outlook forecasts, which predicted earlier this year that developing Asia will see its economic growth fall to 3.4 percent this year compared to 6.3 percent in 2008.