Oil prices to 'slow' East Asian growth<\/p>\n
Mynardo Macaraig, Agence France-Presse, Manila<\/p>\n
Record oil prices coupled with slowing exports are expected to
\nclip economic growth in East Asia to 6.8 percent in 2005, down
\nfrom a robust 7.6 percent notched-up last year, the Asian
\nDevelopment Bank (ADB) said on Tuesday.<\/p>\n
Gross domestic product (GDP) growth in 2006 is expected to
\nslowdown further to 6.6 percent, the ADB's Asia Economic Monitor
\nsaid.<\/p>\n
The growth forecast was \"subject to risks from further
\nincreases in oil prices and a disorderly adjustment of the global
\npayments imbalance,\" the report said.<\/p>\n
The report, released at the ADB headquarters in Manila, said
\nthat a \"loss of economic momentum in major industrial markets,\"
\nand a drop in demand for new information technology products were
\nthe main reasons for the worsening external economic environment.<\/p>\n
The ADB noted that exports grew at a slower rate in the first
\nhalf of 2005, in all of East Asia's larger economies except
\nChina. This development, coupled with higher oil prices and \"a
\ngeneral bias toward tighter macroeconomic policies,\" resulted in
\nthe slower growth in most of the region.<\/p>\n
Excluding China, East Asia is expected to post average growth
\nof 4.4 percent this year, compared to 5.5 percent growth last
\nyear, the ADB added.<\/p>\n
China however will also see its growth slow to 8.9 percent
\nthis year and 8.0 percent in 2006 from 9.5 percent last year due
\nto \"a gradual softening of fixed investment... and somewhat
\ndiminished export prospects.\"<\/p>\n
Singapore was expected to suffer the biggest slowdown in GDP
\ngrowth from 8.4 percent in 2004 to 3.7 percent in 2005 and 4.7
\npercent in 2006.
\n` \"Being a highly open economy, Singapore's economy would be
\nadversely affected by the weak export prospects,\" the ADB report
\nremarked.<\/p>\n
Thailand will see its GDP growth fall from 6.1 percent in 2004
\nto 4.3 and 5.3 percent growth in 2005 and 2006 respectively.<\/p>\n
Malaysia's GDP growth was forecast to fall from 7.1 percent
\nlast year to 5.3 percent this year and 5.7 percent next year
\nwhile Philippine GDP growth would stay at 4.7 percent in both
\n2005 and 2006 from 6.1 percent last year.<\/p>\n
In contrast, Indonesia would see its GDP growth accelerate
\nfrom 5.1 percent in 2004 to 5.6 and 5.7 percent in 2005 and 2006
\nrespectively.<\/p>\n
The bank cited earlier studies showing that if the price of
\noil remained at 55 dollars a barrel, East Asia's GDP growth would
\nfall by 1.6 percentage points while the inflation rate would rise
\n2.2 percentage points.<\/p>\n
Net oil importers, Thailand, the Philippines, South Korea and
\nto a lesser extent China, will be hit the hardest, the ADB said
\nbut even a net oil exporter like Malaysia will be adversely
\naffected as higher oil prices take their toll on its industrial
\ntrading partners.<\/p>\n
\"We now face a backdrop of moderately slowing growth, a
\ngradual build-up of inflationary pressures, and a tightening of
\nUS monetary policy,\" Pradumna Rana, an ADB senior director said
\nin the report.<\/p>\n
\"The key challenge for East Asia is to calibrate fiscal,
\nmonetary, and exchange rate policies while at the same time
\npursuing structural reforms to strengthen domestic demand,\" he
\nadded.<\/p>\n
The bank recommended a \"tightening of monetary policy,\" in
\nChina, Indonesia, Laos, Myanmar, the Philippines, Thailand and
\nVietnam and to a lesser extent, Malaysia.<\/p>\n
The ADB also praised China and Malaysia for moving away from
\nfixed pegs for their currencies and towards more flexible
\nexchange rate regimes, saying this would have \"profound economic
\nimplications.\"<\/p>\n
It said that these moves would \"foster greater exchange rate
\nflexibility in Asia as a whole,\" adding that it would likely be
\n\"accompanied by an appreciation of most regional currencies,\" and
\nwould also help lower inflationary pressures.<\/p>",
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