China’s growth forecast higher at 8.2%

Robust recovery of China and India boosts growth in ASEAN countries

Economic Growth in emerging Asia is expected to show robust expansion this year, thanks to a recovery in big economies including China and India, but capital inflows will continue to pressure currencies, says the Asian Development Bank (ADB).

ADB’s 2013 Asian Development Outlook released on Apr. 8 forecasts growth of 6.6 percent this year and 6.7 percent next year in Asia’s 45 developing economies. The region’s gross domestic product growth rate was 6.1 percent last year.

Rising private consumption and stronger intraregional trade will spur a pickup in growth in developing Asia this year and next, the ADB report said.

“The rebound in China and solid momentum in Southeast Asia are lifting the region’s pace after the softer performance last year,” said the chief economist at the Manila-based bank.

The economies of China and India, the two giants of Asia, are showing signs of recovery.

The bank expects China’s economy to expand 8.2 percent this year after growth of 7.8 percent last year, driven by strong domestic consumption and investment. Its forecast is 0.1 percentage point higher than the prediction it made in December. It forecasts 3.5 percent GDP growth for Hong Kong this year and 3.8 percent next year.

India’s growth is forecast at 6 percent and 6.5 percent for 2013 and 2014, respectively, compared to 5 percent last year. China’s economy is projected to expand by 8.2 percent this year, up from 7.8 percent in 2012. The projection for 2014 growth increases to 8 percent.

Southeast Asian economies will maintain resilient growth this year and the next thanks to robust domestic demand and deeper regional integration. Among them, the bank expects Indonesia to lead the region, with 6.4 percent growth this year and 6.6 percent in 2014.

The GDP growth for Thailand is forecast at 4.9 percent and 5 percent for 2013 and 2014, respectively. This is reasonably high considering the steep growth of 6 percent last year.

The report forecasts ASEAN’s economy will grow 5.4 percent this year, on par with last year’s growth of 5.5 percent, with estimates of 5.7 percent for 2014, with an expected increase of intra-ASEAN trade.

Capital inflows to the region’s 10 large economies – mainland China, Hong Kong, India, Indonesia, Japan, South Korea, the Philippines, Singapore, Taiwan and Thailand – climbed to an average 7.4 percent of GDP in the three years to 2012. That was up from 1.7 percent in the previous three years and near the average of 8.4 percent before the global financial crisis.

The report said governments should remain on guard against inflation and asset bubbles arising from such strong inflows to avoid stoking inflation.

The yuan strengthened to a 19-year-high against the US dollar, adding to signs that capital inflows stemming from quantitative easing in rich countries are flooding into emerging markets.

“Advanced economies will likely continue their accommodative monetary stance, and authorities in developing Asia must safeguard the soundness of the finance sector[s] to avoid the emergence of disruptive asset bubbles,” the ADB report said. The bank expects inflation in developing Asia to rise from 3.7 percent last year to 4 percent this year and 4.2 percent next year.

The ADB’s country director for China, Hamid Shariff, said downside risk on the mainland also came from excessive local government debt. Chin’s local governments are under growing pressure to embark on large infrastructure projects to foster growth and employment, especially in the second and third years of China’s five-year plan, he added.