DEVELOPING ASIA

INFLATION, GEOPOLITICAL TURMOIL LOOM OVER DEVELOPING ASIA’S GROWTH

Developing Asia continues its firm recovery from the global financial crisis, but is projected to post slower GDP growth rates in 2011 and 2012, compared with 2010. This comes as the region faces challenges in fighting inflation, as well as geopolitical uncertainties and the need to develop new sources of growth.

Chito Santiago

The Asset, April 6, 2011

In the latest annual economic publication by the Asian Development Bank (ADB), Asian Development Outlook 2011 released on April 6, it forecasts a regional GDP growth of 7.8 percent in 2011 and 7.7 percent in 2012 – lower than the nine percent increase achieved in 2010.

“Developing Asia, having shown resilience throughout the global recession, is now consolidating its recovery, and the rapid expansion in the region’s two giants – China and India – will continue to lift regional and global growth,” says ADB chief economist Changyong Rhee.

Rhee warns that rising food and oil prices, stoked by the upheaval in the Middle East and North Africa, along with the recent emergency in Japan, present a potential threat to sustained, inclusive growth. Inflation will need to be carefully managed using a mix of policy measures, including more flexible exchange rate management and coordinated capital controls, rather than simply relying on tighter monetary policy.

The report notes that after expanding at 4.4 percent in 2010, consumer prices are set to accelerate further to 5.3 percent in 2011, before easing back slightly to 4.6 percent in 2012. “Developing Asia is home to two-thirds of the world’s poor and it is they who are most vulnerable to the effects of price increases,” says Rhee. “Policy makers must, therefore, consider pre-emptive action to control inflation before it accelerates.”

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