ADB sees Asia's 2009 growth weighed down by Europe
Reuters | 07/02/2009 5:01 PM
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The Asian Development Bank sees economic growth in developing Asia this year being weighed down by recession in Europe but is maintaining a projection of 3.4 percent average growth for now, its chief economist said on Thursday.
Asked if the situation in Asia had changed since the ADB released its 2009 forecast in March, Jong-Wha Lee said: "The situation is a little bit worse because of Europe, at least for 2009."
He said the March forecast had assumed a 2.6 percent contraction on average in Europe in 2009, but the current consensus was for a contraction of between 4.0 to 5.0 percent. The forecast for the United States remained a contraction of 3.0 percent.
Most of Asia relies heavily on export demand from the industrialized West for growth, but Lee said any change in Asia's growth forecasts for this year would only be after the ADB's September review. However, prospects for 2010 looked brighter.
"We are in transition from recession to recovery," he said. "We think this will be a mild and slow recovery because global markets are quite uncertain. We are still dependent on the global economies for our strong economy."
The ADB is advising governments to maintain fiscal and monetary stimulus packages, despite moves by some nations to back off because of looming inflationary pressures, he said.
"Inflation is still a threat to some countries but is this the time to worry about inflation? I should say no.
"Even though there are signs of recovery, these are just some signs. We are not really sure if this recovery is coming strongly.
"It is not too early to prepare for exit strategies, but it is not the time that you should actually implement exit strategies. Some countries need to worry about accumulation of fiscal debt, some countries need to worry about inflation, they need to prepare for any future risk, but that does not mean they should adopt exit strategies at this stage."
In the longer-term, Asia needed to restructure to ensure it could return to sustained growth by developing its local markets and reducing dependence on exports, said Lee, a Korean national who was appointed the ADB's chief economist last month.
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