A new report predicts developing Asia's economic growth will slow by almost half this year, but the Asian Development Bank forecasts that the region will rebound in 2010.
Developing Asian economies are likely to grow by an average of 3.4 percent in 2009, a steep drop from last year's growth of 6.3 percent. The Asian Development Bank on Tuesday issued the revised outlook for the region, just a few months after it predicted average growth of more than five percent.
Jong-Wha Lee is the ADB's acting chief economist. He says this year the region's economies will grow at the most sluggish pace since the Asian financial crisis a decade ago. But, he says, now developing Asia is in a much better position to cope with tough times.
Lee says large foreign currency reserves and steadily declining inflation rates help the region be more resilient. But, he says, Asia's current account surpluses have contributed to the world's economic woes.
"So it's Asia's excess savings and the current account surpluses in a way helped allow the United States to maintain excessive household consumption and huge current account deficits," he said.
Lee says Asia should use its own savings more efficiently and productively, rather than sending the surplus to U.S. markets. The large foreign currency reserves provide Asian governments with funds to boost their flagging economies.
Government stimulus measures are expected to help China's economy grow by seven percent this year, although that is well below the 10 percent growth seen in recent years. India's economy is expected to grow at five percent in 2009, also well down from the past few years.
The ADB, a non-profit development lender, says Hong Kong, South Korea and Taiwan are likely to contract this year, as demand for exports dwindles.
Southeast Asia is expected to grow by less than one percent in 2009. The drop in exports particularly will hurt Malaysia, Singapore and Thailand.
Central Asia may grow by about four percent in 2009 as oil prices remain more than 60 percent below last year's peak.
Lee says it is important for Asian countries to strengthen and increase domestic demand, in response to weakening external demand. "This is not really only for the short-term measures to help the Asian countries coming out of this current economic slowdown," said Lee, "but also it helps Asian countries build up its own strengths to make them more resilient to large, external shocks."
Lee says the short-term outlook is bleak as severe recession in industrialized economies hurts developing nations. But, if the global economy recovers slightly next year, developing Asia should see average growth of six percent in 2010.