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HONG KONG: The Asian Development Bank on Tuesday raised its regional growth outlook for this year, with a huge dose of stimulus spending putting Asia on course to lead the world out of its economic slump.
But the Manila-based bank said that signs of recovery were not strong enough for Asian governments to remove the stimulus prop 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 per cent growth from 3.4 per cent. It also upgraded its 2010 estimate to 6.4 per cent from 6.0 per cent.
"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.
"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.
But the ADB said Asian governments needed to broaden their growth options by developing more intra-regional trade and reducing their risk to external shocks.
Lee added that economic activity in the larger developing Asian economies had rebounded and output looked set for a so-called V-shaped comeback.
However, he cautioned: "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, excluding developed countries such as Japan, Australia and New Zealand.
The ADB said it boosted China's GDP outlook by 1.2 percentage points to 8.2 per cent this year thanks to huge pump-priming in the world's third-biggest economy.
Beijing has targeted growth of 8 per cent to keep unemployment at bay and avoid social unrest. The ADB has forecast 8.9 per cent growth next year, up from 6.5 per cent projected in March.
It highlighted a 585-billion-dollar government stimulus late last year, a massive surge in bank lending in the first half of this year and "aggressive monetary easing".
Export-dependent China announced its huge spending policy last year to boosting domestic consumption and infrastructure projects, as key overseas markets in the United States, Japan and the eurozone went into recession.
The move led to a surge in imports, which in turn helped regional exporters.
India was tipped by the ADB to grow 6.0 per cent in 2009, up from a previous forecast of 5.0 per cent. Next year the ADB estimates the South Asian giant will expand seven per cent, 0.5 percentage points up from 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.
The improved economic outlook is reflected in stock markets regionally, which have surged from their troughs recorded in March, just weeks before the last ADB report.
It said a strong financial sector had helped Asia through the downturn, while high savings rates and low levels of household debt meant consumers were also able to absorb some of the shock.
South Korea was still predicted to contract, albeit at a slower pace due to government intervention.
But the heavily export-reliant economies of Hong Kong, Singapore and Taiwan were expected to shrink sharply this year as demand for their goods stays quiet and their markets only slowly regain strength.
The ADB said despite a positive outlook for Indonesia and Vietnam, a deteriorating path ahead for Malaysia and Thailand had forced it to cut Southeast Asia's outlook to 0.1 per cent growth, from 0.7 per cent in March.
Central Asia, which is grappling with a banking crisis and a fall in the price of its key export oil, is seen growing by just 0.5 per cent now, compared with a previous forecast of 3.9 per cent.
- AFP/so
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