The Asian Development Bank has raised its regional growth outlook for this year and 2010, which it says could be a so-called V-shaped rebound, thanks to the impact of the stimulus spending from governments across the region.
But the Manila-based bank said yesterday that signs of recovery were not strong enough for Asian governments to remove this stimulus yet.
In an update to its annual outlook released in March, the ADB raised its 2009 forecast for Asia’s gross domestic product (GDP) to 3.9% growth from 3.4%.
It also upgraded its 2010 estimate to 6.4% from 6.0%.
It’s another reminder that for Australia, the next year to 18 months or more looks a lot better than for the US, Europe or Japan.
We are in the world’s fastest growing region where China is the star, with growth upgraded sharply to more than 8% for this year and a touch higher for 2010.
But growth in Southeast Asia is forecast to fall this year and remain weak in 2010 because problems in Thailand and Malaysia outweigh the improvement in Indonesia and Vietnam.
And Central Asia will also see weak growth this year and next because of weak financial markets and institutions.
"Despite worsening conditions in the global economic environment, developing Asia is poised to lead the recovery from the worldwide slowdown," said ADB chief economist Jong-Wha Lee wrote in the report
"Now, in September 2009, there are signs of an emerging global recovery, though it is still too early to say if the momentum has fully shifted for the major industrial economies. This raises a critical question for developing Asia: Will the region manage to keep its buoyancy until a sustained global recovery takes hold?
"Firm action by many governments and central banks, the relatively healthy state of financial systems prior to the global crisis, and the rapid turnaround in the region’s larger, less export-dependent economies, all enhanced developing Asia’s growth prospects," the report said.
"Developing Asia is leading the global economic recovery with a strong rebound in GDP growth that began in the second quarter of this year.
"Underpinning the resurgence was the impetus to demand from expansionary fiscal and monetary actions taken by governments throughout the region, especially the PRC and India.
"Indonesia and Vietnam also saw solid economic growth.
"For 2010, the Update upgrades forecasts for East Asia and South Asia as a result of faster than expected growth in the two largest economies.
"Pacific growth is also expected to be better than earlier forecast, and Southeast Asia is virtually unchanged.
"For Central Asia, the forecast is lowered from this year.
"But in short, the 2010 outlook is for growth in all subregions to come back strongly relative to 2009, giving a V-shaped trajectory to developing Asia’s recovery from the world recession."
But that won’t mean a rebound to the very high levels of growth seen before the crunch started in 2007-08.
"The outlook for the industrial countries is for a more modest recovery, with growth in 2010 still much slower than in 2007 and only slightly faster than in 2008," the ADB said.
"With external demand from the main industrial countries still relatively weak, it will be difficult for developing Asia to return to the high growth rates achieved in 2006–2007. Growth in 2010 will only return to about 6–7% rather than the 9–10% rates that were recorded prior to the crisis.
"This is not the time for an exit from expansionary policies—the recovery remains fragile and subject to serious downside risks.
"Global trade is a case in point—even though the trough in world trade volume may have been reached in the first quarter of 2009, both imports and exports are still well below levels attained a year earlier.
"The improved regional outlook should not make developing Asian economies complacent.
"A protracted global slowdown or the hasty withdrawal of stimulus packages can degrade the region’s ongoing recovery."
The report looked at prospects for countries stretching from the former Soviet states of Central Asia to some of the tiny Pacific islands, but excluded developed economies such as Japan, Australia and New Zealand.
The ADB said it boosted China’s GDP outlook by 1.2 percentage points to 8.2% this year thanks to the huge Government pump-priming in the world’s third-biggest economy.
Beijing has targeted growth of 8% a year to minimise unemployment at bay and avoid social unrest.
The ADB says Chinese growth will pick up to average 8.9% in 2010, up from 6.5% forecast in March.
India is tipped by the ADB to grow 6.0% in 2009, up from a previous forecast of 5.0%.
That is forecast to rise to 7% next year, half a per cent more than the March estimate.
The report said despite weak exports and a poor agricultural outlook, "adroit economic management" by New Delhi had minimized the impact of the global downturn.
South Korea was still predicted to contract, albeit at a slower pace due to government intervention, although it was one of the first economies in the region to emerge from the slump.
But the heavily export-reliant economies of Hong Kong, Singapore and Taiwan are expected to shrink sharply this year as demand for their goods remains low and markets only slowly regain strength.
The ADB said despite a positive outlook for Indonesia and Vietnam, a deter
