ADB cuts regional growth forecast
The Asian Development Bank (ADB) has lowered it growth forecast for economic growth in Asia (excluding Japan) this year from 7.8 per cent to 7.5 per cent.
It also cut its growth estimate for 2012 for the region to 7.5 per cent, from 7.7 per cent.
However, ADB raised its inflation forecast to 5.8 per cent this year, from 5.3 per cent. It kept its 2012 inflation estimate steady at 4.6 per cent.
Indeed, given the sovereign debt crises and the dour economic outlook in the US and Europe, the overall growth in emerging Asian economies would not be 'enough to save the world', said Rhee Chang-yong, ADB's chief economist.
Furthermore, Asian economies, including China's, might not be able to rebound as quickly as they did following the liquidity crisis in 2008, Rhee warned.
For China's gross domestic product this year, ADB has cut its forecast to 9.3 per cent, from 9.6 per cent. It also cut its forecast for China's 2012 GDP to 9.1 per cent, from 9.2 per cent.
The lender's view of Chinese inflation has also worsened, raising its estimate for 2011 to 5.3 per cent, from 4.6 per cent.
East Asia - including Hong Kong, China, South Korea, and Taiwan - remain the region's key economic growth drivers.
However, ADB expects the East Asian economy to slow to 8.1 per cent this year, down from its previous forecast of 8.4 per cent.
In contrast, the bank expects economic growth in Hong Kong to accelerate to 5.5 per cent this year, up from its previous estimate of 5 per cent. However, it forecasts inflation in the city to rise to 5.2 per cent, from 4.5 per cent previously.
Of the ADB's revision of its economic forecasts for the region, Rhee said they were 'a slight modification, not a huge drop'.
Rhee said that Asian economies had seen a rise in domestic consumption, with rising intra-regional trade, which are driving growth, albeit at a slower clip, in the region.
ADB's forecasts did not take into account a default by Greece, which Rhee said would bring the financial markets into turmoil. 'Our scenario assumes this won't happen. I hope this won't happen because if this happens ... Asia will be partly affected,' Rhee said.
ADB also warned that Asia's population was ageing at an unprecedented speed in human history. He said Asia was in need of structural reforms to sustain regional economic expansion, and to offer greater economic support to pensioners.
Separately, the bleak economic prospects and the sovereign debt crises in the United States and in Europe would likely hurt growth in emerging markets. Some economists have slashed their economic growth forecasts for China, India, Brazil, and Russia.
The MSCI world index which tracks more than 6,000 stocks in the world, is down by 12.19 per cent since August. Investors are shunning equities fearing that a slowdown in economic growth would hurt corporate earnings.
London-based research firm Capital Economics said yesterday that the US had yet to return to an economic recovery path. It expects the US economy to grow by just 1.5 per cent in 2012, and by 2 per cent in 2013. It said the risks of the US slipping back into a recession over the next few years are increasing.
The percentage loss of the MSCI Asia-Pacific Index of regional stocks this year