ADB downgrades Asian growth

The Asian Development Bank (ADB) says economic growth across 12 key developing Asian economies will be +7.5% this year, compared to the previous forecast of +7.8% The Bank says this slowdown in GDP growth is due to weak demand from the US and Europe.

The forecast covers the economies of Azerbaijan, China, Cook Islands, India, Malaysia, Papua New Guinea, the Philippines, Solomon Islands, Thailand, Timor-Leste, Vanuatu and Vietnam, and the ADB said that growth would have been lower still if it were not for strengthening trade between these countries.

"Strong domestic consumption and expanding intraregional trade are helping to underpin still solid growth levels. Since the onset of the global recovery, the growth in exports to China from several Asian economies has been stronger than their exports to the rest of the world," said ADB chief economist Changyong Rhee.

However, the ADB also warned about the threat of escalating prices in the region. Inflation in developing Asia is expected to average 5.8% this year, an increase on the projection of 5.3% made in April. However, it added that this should slow to 4.6% in 2012 as commodity prices recede.

But overall the ADB said developing Asia was in a strong position to cope with this year's soft global economic conditions. "Ample fiscal space, even after the recent spate of fiscal stimulus measures, and large foreign reserves provide a buffer against further downside risks," said Mr Rhee.