Economic stagnation in the major industrial economies of the West is expected to be offset by increased economic growth and local demand from south-east Asia, the Asian Development Bank (ADB) has announced. In its latest report, Asian Development Outlook 2012, the ADB calculated that growth in Asia will be progressively driven by increased local demand, and growth in the sub-region of south-east Asia will accelerate from 4.6% in 2011 to 5.2% this year.
While exogenous shocks from the eurozone crisis continue to pose the greatest risk to growth in the near term in Asia, the ADB remained confident in its expectations that Asia can meet the challenge of an economic slowdown in Europe. Haruhiko Kuroda, president of the ADB, said: “The eurozone crisis highlights the need for developing Asia to rebalance its economies toward domestic and regional demand, and from dependence on exports destined for advanced countries.” However, he added: “Since the last global crisis eased, budget deficits have been narrowed, policy interest rates have been raised, and regional and global safety nets for liquidity support have been strengthened.”
Following its analysis of 45 economies in the Asia-Pacific region, the ADB report predicts that the growth momentum of all 45 countries will continue over the coming years, with growth forecasted to drop from 7.2% in 2011, to 6.9% in 2012, before picking up pace at 7.3% in 2013. The ADB added that the easing of global commodity costs means that inflation is not an immediate threat for the region. “Consumer prices in developing Asia are forecast to rise by 4.6% in 2012 and 4.4% in 2013, down from 5.9% in 2011,” it said.
When examining south-east Asia as a sub-region, the ADB argued that the lower growth registered last year occurred as the south-east was hit by weakened export markets, domestic policy tightening and natural disasters that disrupted trade and production. Nonetheless, it remains optimistic in its outlook this year, citing the economic recovery in Thailand, which has led the growth rate of its economy to bounce back from a low of 0.1% in 2011 to 5.5% this year. The ADB expects this resurgence will have positive spillover effects in the wider region.
The ADB made it clear that while many industrialised countries continue to face economic hardships and sluggish growth prospects, Asia remains on track to witness steady growth.