The Asian Development Bank says economic growth in the Asia Pacific will weaken slightly in 2008 due to volatility in financial markets and rising oil prices. In a report, the Manila-based institution said the region is expected to remain financially strong, but faces new financial risks. Naomi Martig reports from VOA's Asia News Center in Hong Kong.
The Asian Development Bank, in a report released Thursday, says growth in the Asia Pacific region should fall to 8 percent in 2008, half a percentage point lower than in 2007.
In China, the region's largest economy, the ADB is predicting that if government measures to cool the economy take hold, economic growth will slow to 10.5 percent in 2008, from 11.4 percent this year.
Speaking in Hong Kong, Jong-Wha Lee, head of the ADB's Office of Regional Economic Integration, said the region is facing greater risks now than just a few months ago. A hard landing of the U.S. economy, for instance, could have an impact on the region's growth.
"Because the sharp decline in the U.S. consumer demand will have an impact on the U.S. import demand and through the trade linkages will have the impact on the Asia's export to the U.S.," he said.
Lee says, however, that a sharp slow down in the U.S. economy is not likely. U.S. economic growth is down from 2.9 percent last year, to an expected 2.2 percent this year. The ADB is projecting it will slow even further in 2008, driven by a weak U.S. subprime mortgage market and related financial market volatility.
Other financial risks in the East Asian region include a further tightening of global credit, abrupt adjustments in exchange rates and the continued rise in oil and commodity prices.
Inflation due to higher food, oil and commodity prices remains a concern in many economies, particularly in China, where inflation hit an 11-year high in November.
Lee said policy makers in Beijing are adopting measures to help control inflation. But he says the ADB believes China needs to loosen its exchange rate in order to effectively deal with the problem.
"Because the more appreciation will help to reduce price inflation of imported goods, especially grain and also oil. And also the increase in exchange rate flexibility will help reduce liquidity in the domestic financial markets," he said.
Several countries, including the United States, criticize China for keeping its currency artificially low.
The ADB said Hong Kong's GDP should grow 5.4 percent in 2008 after 6.1 percent growth in 2007. Growth in other countries including Japan and South Korea is also expected to weaken.