Developing Asia's economy to cross expectations in 2006

Developing Asian countries were expected to post a better-than-expected economic growth of 7.7 percent in 2006, propelled by strong performances of China and India, the Asian Development Bank (ADB) said in a report Wednesday.

In an update of its annual Asian Development Outlook 2006 report, the Manila-based ADB said the new forecast was up 0.5 percent points from its April forecast.

The region's economic expansion would ease to 7.1 percent in 2007, slightly higher than the seven percent projection in April.

"Developing Asia's rapid growth is underpinned by strong performances by China and India, which together account for more than 50 percent of regional gross domestic product (GDP)," ADB chief economist Ifzal Ali said.

"The region should take advantage of this strength to act in three areas that could undermine growth if not addressed - the need to complete the adjustment to high oil prices, the need to pick up the pace of fiscal consolidation and the need to stimulate investment," he added.

The ADB said China's economic growth was forecast to hit 10.4 percent in 2006, up from April's projection of 9.5 percent, due to booming investments and exports.

India's economy, on the other hand, was predicted to grow 7.8 percent in 2006, up from an earlier forecast of 7.6 percent, propelled by the services sector and an industrial expansion that continues to gather momentum.

The remaining countries of developing Asia were expected to grow by more modest averages of 5.5 percent in 2006 and 5.1 percent in 2007, the bank said.

The report said the outlook was "predicated on generally favourable external conditions", but also factors in tighter global liquidity, softer growth in the industrial countries and oil prices staying high.

It added impacts on commerce of recent heightened security alert on international air travel were expected to be short-lived.

"However, if elevated threats persist over a prolonged period and disrupt international travel, this would clearly be a negative factor, especially for those countries which are highly dependent on tourism," the report pointed.

The ADB also revised upward East Asia's economic growth forecast to 8.2 percent from 7.7 percent in April, driven mainly by the faster expansion estimated for China that in part influenced upgrades for Hong Kong and Mongolia.

Growth in South Asia in 2006 was projected at 7.5 percent up from the forecast of 7.3 percent in April, as increasingly vibrant manufacturing activities in Bangladesh, India and Pakistan lift exports.

In Southeast Asia, the forecast downgraded marginally to 5.4 percent from the initial prediction of 5.5 percent.

"Political uncertainty and a postponement of large infrastructure projects in Thailand and slowing consumer spending in Malaysia have crimped growth from the April estimates for the two countries," the bank said.

However, it noted favourable weather conditions and fiscal improvements in the Philippines, and strength in electronics and pharmaceutical manufacturing in Singapore boosted their outlooks.

In Central Asia, the ADB lifted projections for the major oil-producing countries of Azerbaijan and Kazakhstan, as well as Armenia, pushing the sub-region's forecast to 11.3 percent, one percent point higher than the initial forecast.

Faster growth was also anticipated in the Pacific region, with average GDP now projected to expand 3.3 percent in 2006 due to upward revisions for the two largest economies of Papua New Guinea and Fiji Islands.

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