ADB’S FORECASTS FOR 2012

ASIA FACES ‘MUCH GREATER’ RISKS ON GLOBAL SLOWDOWN, ADB SAYS

Bloomberg

Bloomberg BusinessWeek, December 06, 2011

Asian economies are facing “much greater downside risks” now because of the possibility of a recession in the U.S. and Europe and the threat of destabilizing capital flows, the Asian Development Bank said.

The biggest challenge for policy makers in emerging East Asian nations is to safeguard growth against the threat of another global economic crisis, the Manila-based lender said in its Asia Economic Monitor report today. Uncertainty over the world economy means officials in the region must have “sufficient flexibility” to adjust policies quickly, it said.

“The cautiously optimistic outlook for emerging East Asia is subject to much greater downside risks now than just a few months ago,” the ADB said. “The global economic recovery could flounder if the euro zone and the U.S. fall back into recession, causing another global financial crisis. Large and destabilizing capital flows could complicate the region’s macroeconomic management and jeopardize economic growth.”

Asian policy makers have shifted their focus to shielding growth, rather than stemming inflation, as Europe’s debt woes and a struggling U.S. economy increase the risk of another global recession. Australia lowered borrowing costs for a second straight month today and Indonesia and Thailand cut interest rates last month, while the Philippines in October unveiled a fiscal stimulus package to spur the economy.

Asia stocks fell for the first time in seven days today after Standard & Poor’s put 15 European nations on watch for potential ratings downgrades. The MSCI Asia Pacific Index retreated 1.3 percent as of 1:13 p.m. in Tokyo.

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