April 1, 2014 / 1:46 AM / 4 years ago

Developing Asia can sustain growth pace, risks easing: ADB

MANILA (Reuters) - Developing Asia is poised to sustain its current growth momentum and is well positioned to manage risks coming from a slightly slower Chinese economy and possible uneven demand from major industrialized nations, the Asian Development Bank said.

Asian nations can undertake preemptive measures to protect the region’s growing economy from unpredictable capital inflows, said the Manila-based lender as it unveiled its forecasts for the region for 2014 and 2015.

The bank said it expects the region, grouping 45 countries in Asia-Pacific, to grow 6.2 percent this year, slightly faster actual growth of 6.1 percent in 2013, before accelerating further to 6.4 percent in 2015.

“Most regional economies have strengthened their economic fundamentals. Looking ahead, strengthening macroprudential measures before the boom can help avert sudden capital reversals that accompany the bust,” the ADB said in its Asian Development Outlook 2014.

While risks to the region’s growth outlook have eased, further shock to global financial markets from the U.S. tapering of stimulus and expected policy tightening, an uneven recovery in developed economies, and the possibility of slower growth in China as it aims to curb credit expansion would weigh on the region’s economic uptrend, the bank said.

Growth in China is expected to be 7.5 percent this year, the ADB said, steady from its December forecast but slower than 7.7 percent growth in 2013. It will likely lose momentum to 7.4 percent in 2015 as the country pursues policies aimed at more equitable, balanced and sustainable growth, it said.

India is forecast to accelerate to 5.5 percent this year from 4.9 percent in 2013, but slower than the 5.7 percent forecast in December. The bank said the South Asian nation was still operating below potential which can be solved by clearing investment bottlenecks.

Improving global trade conditions will help support Southeast Asia’s growth at 5.0 percent this year, steady from 2013 but slower than a December estimate of 5.2 percent, with Malaysia, Singapore and Vietnam leading the way. Political unrest will continue to restrain growth in Thailand, with the economy picking up speed only in 2015, the ADB said.

The bank also said inflation in Asia is expected to be largely steady with global commodity prices remaining soft. Possible upside risks are likely from adjustments in subsidized fuel and power rates in some countries, with regional inflation seen at 3.6 percent, almost steady from previous forecasts of 3.7 percent but higher than an actual 3.4 percent last year.

The ADB noted that despite developing Asia’s rapid growth, it continues to lag other regions in public spending on education and healthcare. The bank urged countries to expand revenue-raising measures to fund targeted poverty-reduction projects and narrow income gaps.

(This story corrects paragraph three to actual growth of 6.1 percent in 2013; corrects forecasts for China and India in bullets and paragraphs six-seven, SEAsia forecast in paragraph eight)

Reporting by Rosemarie Francisco; Editing by Chris Gallagher

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