ADB sees slower growth risk in emerging markets

Emerging East Asian economies risk slower growth after they failed to take advantage of ample cash supply made available by global monetary authorities to build roads and ports, the Asian Development Bank said.

Funding infrastructure needs had become harder following recent turmoil in regional financial markets, and borrowing costs could rise further when the United States Federal Reserve starts tightening policy, the Manila-based lender said in a report released yesterday.

Weakening growth momentum could accelerate capital outflows, and moves to defend Asian currencies by raising interest rates would further curb economic expansion, it said.

The ADB estimates the region needs to invest US$8 trillion in transport, communications and energy framework in the decade to 2020 to sustain growth.

Developing deep and more liquid bonds markets could help emerging economies attract investors such as pension funds to finance such projects and guarantees could help boost the ratings of infrastructure bonds, it said.

"When you are having a party, plenty of cheap money, you don't really pay too much attention on what is more fundamental and needed in the long run," said Iwan Azis, the head of the ADB's economic integration office.