The Manila-based
lender maintained its growth forecasts for 14 emerging and newly
industrializing East Asian economies in 2011 and 2012. But it said the
region faces risks that also include more volatile financial markets and
destabilizing inflows of short term capital, also known as "hot money."The
ADB's growth forecasts were unchanged from a report in April, with East
Asia forecast to expand nearly 8 percent this year and next. It
forecasts China's gross domestic product growth at 9.6 percent this year
and 9.2 percent next year.But it indicated that economic growth
forecasts for China, Malaysia, Thailand and Vietnam would likely could
be cut. That would also result in a downgrade for the region, which
includes 10 Southeast Asian countries as well as the economies of China,
Taiwan, Hong Kong and South Korea.In the first half of 2011,
economic growth across East Asia eased from a blistering pace as
inflation surged across much of the region, driven by higher commodity
prices and strong economic recovery."Rapidly rising inflation risks a
wage-price spiral that could derail the region's recent strong growth,"
the report said, noting that inflation in many economies has risen
above 10-year averages.The report also detailed other sources of rising prices.In many East Asian economies property prices are climbing quickly.The
devastating tsunami and nuclear disaster in Japan in March has also
spurred a debate over the use of nuclear power, which could drive up
energy prices by boosting demand for other energy sources such as oil
and gas.The threat of inflation has been a major worry in Asia this
year. The ADB warned in April that surging food prices of 10 percent on
average in many Asian economies could drive 64 million more people into
poverty.Iwan J. Azis, head of the lender's Office of Regional
Economic Integration, said he expected governments to use a mix of
different methods to fight inflation, including allowing their
currencies to strengthen. That would make imported goods including food
cheaper.The ADB's economists also fretted about the dismal prospects
for the US and Europe, which are plagued by high unemployment and debt
problems. Both are major customers for East Asia's exports.Azis
warned that the region could also be hurt if the US government's
top-notch credit rating is downgraded amid fears that US lawmakers may
fail to come up with a way to prevent a debt default in the world's
biggest economy.That could depress the dollar against other
currencies, hurting Asian governments that hold large amounts of US
government debt in their foreign reserves, Azis told reporters in
Beijing.China is the biggest holder of US government debt, with
$1.15 trillion in Treasury debt by the end of April, according to US
government data released earlier this month.Meanwhile, Japan's
economy's, already struggling with recession following production
disruptions caused by the tsunami, must also cope with a strengthening
yen, which will hurt its exports by making them more expensive."If
the recovery in Japan, US and euro zone falters, sluggish external
demand could once again disrupt the region's exports," the report said.
