The Asian Development Bank raised its economic growth forecast for the region on strengthening expansions in China, India and Indonesia, and said it's too early for governments to withdraw stimulus policies.
Asia, excluding Japan, will grow 3.9 percent in 2009, faster than a March estimate of 3.4 percent, the Manila-based institution said. Growth may accelerate in 2010 to 6.4 percent, it said.
The region is leading the world's emergence from its deepest recession since the 1930s after Asian policymakers cut interest rates to unprecedented lows and governments announced more than $950 billion of stimulus measures, helping the global economy avert a spiral into another Great Depression.
The ADB said withdrawing the measures too soon may derail the "fragile" recovery, echoing comments by the Obama administration and European officials ahead of this week's Group of 20 nations summit in Pittsburgh.
Asia's growth "is a result of synchronized expansionary policies" in the region, said Vishnu Varathan, an economist at Forecast Singapore Pte. The expansion doesn't mean that the region is "decoupling" from the rest of the world, he said.
Asian governments may begin rolling back stimulus programs as early as the first quarter of 2010, Varathan said. "They may not be wrong but the risk is that it could be a tad premature especially if they do it all at the same time," he added.
Confidence in the world economy held at a record high in September after reports suggested the recession is over and officials said they won't rush to withdraw stimulus, a Bloomberg survey of users on six continents showed on Sept 17.
Recovery in Asia also hinges on the revival of growth in Europe and the US, as this will affect the region's export-dependent economies, the ADB said. Federal Reserve Chairman Ben Bernanke said last week the recession in the US has probably ended.
"Any slippage in the major industrial economies' recovery would delay the region's return to its long-term growth path," the ADB said.
Inflation in Asia may average 1.5 percent in 2009 compared with a March forecast of 2.4 percent, the ADB said. It expects inflation to accelerate to 3.4 percent next year as growth strengthens.
Monetary policies
"Central banks in the region will therefore want to put a tight watch on monetary policies so as not to encourage asset bubbles that would inflate prices to levels that are no longer justified by fundamentals," the ADB said.
South Korea's financial regulator said earlier this month it will tighten restrictions on mortgages for people buying homes in the capital and surrounding areas to slow the increase in lending. Loans to households in August climbed 3 trillion won ($2.5 billion) to 405.1 trillion won, according to the Bank of Korea.
China will expand 8.2 percent this year, compared with the March forecast of 7 percent, the ADB said. India's economy will grow 6 percent this year, up one percentage point from the earlier estimate, it said.
China's August industrial production rose 12.3 percent from a year earlier, the most since the same month in 2008, while India's factory output increased for a seventh straight month in July. China's expansion follows a 4 trillion yuan ($586 billion) stimulus package, record lending and a rebound in property investment and sales that have countered a slump in exports.
The ADB forecast Indonesia's economy will expand 4.3 percent this year, compared with the March estimate of 3.6 percent. South Korea's economy will shrink 2 percent in 2009, compared with the earlier predicted 3 percent contraction, it said.
Source:China Daily
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