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New Report Predicts Economic Growth for Asia Despite US Recession

An annual U.N. Economic and Social report is projecting that economic growth in the Asia Pacific region will continue this year, despite the expected recession in the United States. As Naomi Martig reports from Hong Kong, the survey says that together with U.S. economic uncertainty, rising food prices and poor agricultural policies are key challenges for the region.

The United Nations Economic and Social Commission for Asia and the Pacific says developing countries in the Asia Pacific region are expected to grow at a slightly lower rate, at 7.7 percent in 2008, after enjoying its fastest growth in a decade in 2007.

China and India, the region's economic drivers, are projected to grow at 10.7 percent and 9 percent. And for the region's developed economies, the U.N. says they can expect a growth of 1.6 percent this year, slightly lower than the two percent recorded in 2007.

Shamika Sirimanne is a senior United Nations economist. She says while the Asia Pacific economies will see some moderation in growth through 2008, they are fundamentally stronger than a decade ago during Asia's 1997 financial crisis.

"We think these economies are very, very resilient," she said. "They have low debt, they have budget deficits under control, surpluses in trade balances in
many places plus there is about three-point-five trillion dollars in reserves. Plus the fact at the moment there is very low exposure to the
U.S. subprime crisis in the region."

But Sirimanne warns there are still great uncertainties facing the region, especially over the degree of the slowdown in the United States economy.

The U.N. report noted that rising food prices are a much greater inflation challenge than oil prices, because food accounts for a far higher proportion of consumer spending.

The Food and Agricultural Organization says food costs worldwide spiked 23 percent from 2006 to 2007. Grains went up 42 percent, while dairy increased by 80 percent.

The survey also stressed that chronic neglect of the agriculture sector in the region is keeping 218 million people stuck in extreme poverty.

Malcolm Cook is the Program Director for East Asia at the Lowy Institute in Australia. He says policy makers in many parts of the Asian region, including the Philippines and Indonesia, have failed to improve some vital areas of its agricultural sector, and have financially lost a lot because of it.

"Maintaining irrigation systems, extending irrigation systems, and improving farm to market access roads, so pretty much your meats and potatoes of agricultural policies," he said.

The report called on governments to implement policies that focus directly on improving agricultural productivity, such as connecting the rural poor to cities and markets and making it easier for farmers to access loans and crop insurance.

The report also says liberalizing global trade in agricultural would bring 48 million people out of poverty. Agriculture provides employment for 60 percent of the working population in the region.