ADB forecasts Asia to post robust growth in 2007-2008

Risks facing developing Asia are less than in the latter half of 2006, ADO 2007 says. Risks to the region include price volatility, a disruption in oil supplies, rising protectionist pressures, a spike in geopolitical and security risk, and an avian flu pandemic.

“The recent volatility in global equity markets is a timely reminder of looming risks,” says Mr. Ali. “If asset values crumble then developing Asia may have to bear disproportionately high costs.”

Inflationary pressures will wane in 2007 in response to policy tightening measures taken in the region along with the recent slide in global oil prices. Current account surpluses will also start to slowly narrow as growth gently decelerates in developed economies. “Prudent macroeconomic management will ensure that developing Asia’s economic outlook will remain favorable” says Ifzal Ali, Chief Economist of the Manila-based multilateral development bank.

Developing Asia’s long-term economic growth potential hinges critically on its ability to respond and adapt to a constantly changing environment, ADO 2007 says. Countries in the region that have achieved economic success have transformed through industrialization and the expansion of services.

“Walking on two legs – fostering manufacturing and services – is the only viable development model for most countries,” says Mr. Ali.

While policies have to be country-specific, some of the key essential ingredients to successful transformation for sustaining economic growth include: physical capital accumulation, a conducive business environment, worker skills and versatility and economic integration.

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