International | Apr 07 2006
The Asian Development Bank (ADB) has released its latest forecasts for growth in the Asian region, predicting a slight slowdown both this year and next year.
The bank is forecasting 2006 growth for the region of 7.2%, falling to 7% in 2007 after hitting 7.4% last year, the decline to be the result of ongoing strength in oil prices and a slight cooling in the rate of China’s growth.
On its estimates, the Chinese economy will expand by 9.5% this year but only achieve 8.8% growth in 2007 as both exports and industrial production decline slightly.
It will be a similar story in much of the region, the bank suggesting export growth will moderate and monetary policy will tighten, while inflationary pressures will increase as the impact of the high oil price continues to filter through.
The bank expects growth in both Vietman and Cambodia, which was above 8% in both countries last year, will drop below that rate this year, while higher interest rates are also likely to produce a slowing in Indonesia’s growth.
India is expected to break the trend though, with the bank estimating it will record growth of 7.6% this year and 7.8% in 2007, while Laos is tipped to continue its recent strong growth and record a lift of 7% this year.
Taking a broader view, the bank suggests there are two major issues that could impact on growth going forward. The first is unemployment, as it estimates more than 500 million people in the region were without jobs last year and a total of 750 million new jobs will be needed in the coming decade.
The second is the potential for sharp changes in either currencies or interest rates, which could reduce the competitiveness of economies in the region. The bank suggests further economic reforms and initiatives to free up trade are required to strengthen economies to deal with such potential shocks, which may lead to support for Japan’s proposal for the creation of an Asia-Oceania free trade block.
