The Asian Development Bank says East Asian economies are moving toward
a recovery after sharp declines triggered by the global economic
downturn. But the bank's economists say a sustained recovery will
happen only after the major industrialized economies begin to grow
The Asian Development Bank report released Thursday says the economies of East Asia are leaving behind the worst of the economic downturn that hit the world last year.
Jong-Wha Lee, a senior ADB economist, says growth in the emerging East Asian economies fell because they still depend heavily on exports for growth.
"The four middle-income ASEAN economies - that includes Indonesia, Malaysia, Philippines and Thailand - as a group have contracted one percent in the first quarter of 2009. Thailand posted the largest decline by 7.1 percent," he said.
But, the ADB report says, the pace of decline has slowed. The strongest signs of a recovery are in the emerging East Asian financial markets, which have risen almost 70 percent since last November.
During the second quarter China's economy grew almost 8 percent, while early estimates show Singapore's contraction has moderated. Industrial production has also picked up in Indonesia, Malaysia, Philippines, Thailand and Vietnam.
"Emerging East Asia has entered the transition from recession to recovery as expansionary policies gain traction. In particular, indicators from China are very encouraging - hopes are growing that China may lead Asia's recovery. [But] signs of the recovery remain still tentative while any pending recovery will likely to be weak and fragile," said Lee.
The ADB also is cautious about hopes that China's growth will boost other Asian economies, in part because China competes with its neighbors in many export markets. The bank adds that China's growth still heavily depends on spending to improve the infrastructure.
In short, the ADB says, Asia needs a strong economic recovery in the United States, Japan and Europe.
"So it is China alone or Asia alone cannot be the single engine of growth for Asia. We need two engines - the other engine - perhaps more important - is the major industrialized countries. So without a full global recovery, Asia will be (find it) very difficult to go back to the strong sustained growth," said Lee.
The bank forecasts that emerging East Asian economies will expand by about three percent this year, and six percent in 2010.
But, the ADB warns a prolonged recession in the developed countries and the risk of deflation could slow growth. The bank calls on governments to refocus on domestic consumption and away from exports, to create more sustainable growth.