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ADB Forecasts Slower Growth in East Asia in 2007


The Asian Development Bank forecasts lower growth for East Asia in 2007 because of an expected economic slowdown in the United States and Europe. Claudia Blume reports from VOA's Asia News Center in Hong Kong.

The Asian Development Bank expects GDP growth in East Asian economies to be 4.4 percent on average in 2007, down from 4.9 percent this year.

In its twice-yearly review of the East Asian regional economy, launched in Hong Kong on Thursday, the ADB says it expects an economic slowdown in the United States and Europe in 2007.

Masahiro Kawai, head of the ADB's regional economic integration office, says this will impact East Asia's export-driven economies.

"For many of the region's economies, GDP growth tends to be positively correlated with export trends and we expect exports to moderate," Kawai. "That is the main factor behind the somewhat unfavorable external environment for East Asia."

The ADB says its outlook may be over-optimistic, especially if the U.S. economy experiences a sharper-than-expected slowdown. The bank also warned that the region could suffer from heightened market volatility, caused by worries about the U.S. economy that include a possible recession, a sliding dollar, and an uncertain monetary policy.

Another risk to the region is that of a renewed spike in oil prices, which fell in the second half of this year.

Mr. Kawai says there are also worries about China's ability to cool its soaring economic growth.

"Despite recent slower investment expansion there remains the medium-term risk that China's GDP growth may not slow smoothly to a sustainable pace and there is uncertainty as to whether measures taken so far to reign in over-investment have been adequate and sufficient," he said.

The ADB expects China's GDP growth to ease to 9.5 percent next year, down from an estimated 10.4 percent growth in 2006.

The bank says countries in the region need to focus on rebalancing sources of growth - away from export toward domestic demand. Other policy adjustments the ADB recommends include more exchange-rate flexibility.

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