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Wednesday, 7 December 2011

ADB cuts East Asia growth forecast as risks grow

Kelvin Chan

HONG KONG (AP) -- Economic growth in East Asia will continue to wane in 2012 as sovereign debt problems in Europe and an anemic U.S. economy raise the risk of a deep global downturn, the Asian Development Bank said Tuesday.

The ADB cut its 2012 growth forecast for 14 East Asian economies excluding Japan to 7.2 percent from the 7.5 percent predicted in September. In a worst-case scenario -- in which the U.S. and Europe slow as much as they did in the 2008-2009 global crisis -- East Asia would grow only 5.4 percent in 2012, the development lender said.

The ADB also lowered its 2011 forecast slightly to 7.5 percent from 7.6 percent.

The Manila-based lender said its "cautiously optimistic" outlook for the region faces "much greater downside risks than just a few months ago."

Those risks include a deep recession in both the Europe and the U.S., rising protectionism and persistent or resurgent inflation.

"The recovery in advanced economies lost steam this year and they will continue to struggle," the report said. "While U.S. economic growth could strengthen somewhat, the eurozone will likely fall into either a brief recession or a more severe long-term downturn."

Emerging Asian economies are "certainly not immune" to a major slowdown in advanced economies, which would hurt their economic growth and pose "significant policy challenges," it said.

Many developing Asian countries including China are dependent on economic growth in the U.S. and Europe, which are major markets for the toys, clothing and electronics churned out by the region's countless factories.

Safeguarding the region's robust growth against another global crisis is the biggest challenge, said the report, which urged policymakers to increase regional trade and financial ties and expand links with other emerging economies to reduce their dependence on the U.S. and Europe.

The report covers China, Hong Kong, Taiwan, South Korea and 10 Southeast Asian countries.

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