Developing Asia will continue to expand solidly over the next two years, even as inflation, geopolitical uncertainties and the need to develop new sources of growth present looming challenges to policy makers, the Asian Development Bank (ADB) has said.
The Asian Development Outlook 2011, the multilateral lending agency's annual economic publication, has projected a regional GDP (gross domestic product) growth of 7.8 per cent in 2011 and 7.7 per cent in 2012. Even as the estimated growth rates are lower than the nine per cent expansion posted in 2010, it noted that the region “continues its firm recovery” from the global economic crisis.
According to ADB's Chief Economist Changyong Rhee, developing Asia, having shown resilience throughout the global recession, “is now consolidating its recovery and rapid expansion in the region's two giants — the People's Republic of China and India — will continue to lift regional and global growth.''
At the same time, rising food and oil prices, stoked by upheaval in the Middle East and North Africa, along with the recent emergency in Japan, present a potential threat to sustained, inclusive growth.
Inflation, the report said, will need to be carefully managed using a mix of policy measures, including more flexible exchange rate management and coordinated capital controls, rather than simply relying on tighter monetary policy.
After expanding at 4.4 per cent in 2010, consumer prices are set to accelerate further to 5.3 per cent in 2011 before easing back slightly to 4.6 per cent in 2012, the ADB estimated.
Commenting on the economic scenario, Mr. Rhee said: “Developing Asia is home to two-thirds of the world's poor and it is they who are most vulnerable to the effects of price increases … Policy makers must therefore consider pre-emptive action to control inflation before it accelerates.”
In the longer run, Asia will have to forge stronger links with non-traditional markets to maintain growth and to make it more inclusive, the report said while pointing out that there is considerable potential to broaden South-South links with fast-growing emerging economies, both within Asia as well as in Latin America, Africa and the Middle East. To do this, however, policy makers will need to remove barriers to trade and investment within the South, which are currently higher than those with the industrial world.
The ADO noted that while East Asia will continue to lead the region's post-crisis recovery with projected growth of 8.4 per cent in 2011 and 8.1 per cent in 2012, Southeast Asia's expansion will moderate after an exceptionally strong recovery in 2010, with growth coming in at 5.5 per cent for 2011 and 5.7 per cent in 2012.
