Good news for Australia, the Asian Development Bank says Asia will grow a bit faster in the last half of 2010, while it sees mostly solid growth in 2011, compared with the upgraded estimates for the December half of this year.
The Bank sees two of our biggest markets, China and India, maintaining solid growth, although India does face a continuing problem with inflation.
And this is also good news for two of our other major export markets, Japan and South Korea, which have seen their economies and exports dragged higher, especially by the rebound in China.
The bank said in its annual flagship economic publication Asian Development Outlook 2010 Update, released yesterday, that growth in developing Asia should now be 8.2% in 2010, up from the April forecast of 7.5% and the 5.4% rate in 2009.
"Strong export recovery, robust private demand, and the sustained effects of stimulus policies allowed the region to experience solid growth in the first half of 2010.
"This improved performance is broad-based and is projected to carry on for the rest of the year, the bank said in the introduction to the report.
“Developing Asia’s recovery has led the world.
"The speed and strength of the region’s rebound continues to surprise on the upside, allowing ADB to upgrade its 2010 growth forecasts for each of the sub-regions.
"The V-shaped recovery has laid the foundation for sustained growth beyond the short term,” says ADB Chief Economist Jong-Wha Lee.
Despite the region’s vigorous rebound, inflationary pressures remain manageable. In fact, inflation is forecast to be generally within the central banks’ comfort zones, at 4.1% for 2010 and 3.9% for 2011.
The region’s two giants continue to perform strongly, lifting up the growth of the entire region.
The bank says it expects China to see moderating growth in the final six months of 2010. First half growth was 11.1% (10.3% in the second quarter).
The ADB is forecasting growth for the year of 9.6%, which implies a second half slowdown to an annual rate of around of 8-9% by the last quarter, which is well down from the strong 11.9% rate in the March quarter.
The ADB sees a further, milder slowdown next year to an annual rate of 9.1%. That will still be above the 8.7% rate for 2009, which was concentrated in the final three quarters after the almost flat March three months.
Both the full year forecast for 2010 and the 2011 forecasts for China were unchanged from those in the April update from the ADB.
"Consumer price pressures remained relatively subdued, with some expected utilities tariff increases put on hold, and the average annual inflation rate is now projected at 3.2% for 2010, down from 3.6% forecast in April. The 2011 rate at 3.2% is unchanged from the April forecast.
"GDP growth for the third quarter of 2010 is seen at about 9%, dipping to 8% in the fourth, with merchandise export growth likely to decelerate in the second half of 2010, as a result of a base effect from the year before, subdued demand, and the expiration of PRC tax rebates.
"Private consumption is likely to remain brisk, underpinned by growth in employment and incomes.
"The fiscal deficit as a percentage of GDP is expected to narrow in 2011, while growth in fixed asset investment, which has been easing in 2010, is likely to moderate further."
But the Bank says Chinese policymakers will need to boost domestic consumption to make growth more sustainable and inclusive in the long term.
Among measures to encourage consumption and promote a rebalancing of growth are allocating more fiscal resources to public services to raise the disposable income of households, strengthening social safety nets, increasing the supply of low-income housing, expanding property taxes, and boosting fiscal transfers from the central government to the provinces.
The ADB’s 2010 forecast for India is slightly upgraded to 8.5% from 8.2% in April, while retaining its FY2011 estimate at 8.7%.
"Growth is being supported by robust investment, increased capital inflows, and stronger industrial output, buoyed by rising consumer demand.
"The current account deficit forecast was also adjusted to 2.7% of GDP in FY2010, from 1.5% previously to reflect a sharp pickup in trade flows, with exports projected to grow by 18% in FY2010, and imports by around 20%."
At the same time, ADB raised its forecast for annual average inflation in FY2010 to 7.5%, up from 5% in April, warning that high food prices remain a near-term concern.
"It also noted that the rupee’s appreciation by more than 11% in real terms between August 2009 and August 2010, poses an additional challenge for policymakers as they seek to maintain high growth while winding back the monetary and fiscal stimulus measures used to help the economy recover from the global economic crisis. "
The Bank warned that the "one big cloud hanging over the region’s otherwise sunny short-term horizon is the continued fragility and uncertainty of recovery in the industrialized countries."
"While these countries have performed better than expected in the first quarter, their growth momentum slowed down noticeably in the second quarter.
"The threat of another contraction in industrialized countries still remains, although the likelihood is small.
"This risk from
