Growth in China, India and other developing countries hit by weak demand from Europe
Europe‘s sovereign debt crisis presents the greatest risk to Asian economies in the next 12 months, according to the Asian Development Bank, which fights poverty in the region. The Manila-based lender, which is backed by 67 countries, said in its annual health check of developing Asian economies that policymakers will need to boost spending at home to offset weak demand from Europe.
“The greatest risk to the outlook is uncertainty surrounding the resolution of sovereign debt problems in the eurozone,” it said, warning that policymakers must “follow the only half-resolved eurozone debt problems closely, and be ready to act.”
The ADB predicted that without a damaging new twist in the euro crisis, the countries it serves – which include China, India and Indonesia – will achieve average growth of 6.9% in 2012, slightly weaker than the 7.2% seen last year.
Joseph Zveglich, the ADB’s assistant chief economist, in London to launch the report, said Asian economies accustomed to rip-roaring growth rates in the boom years before the financial crisis must adapt to a new environment: “There is a need to adjust to what is likely to be a long, drawn-out soft patch in terms of the global outlook.” He said governments should continue to rebalance their economies away from the export-dominated model of the past model, towards more sustainable consumer demand at home.
The ADB rejects the much-feared idea of a “hard landing” for China, predicting instead that it will chalk up growth of 8.5% this year, and 8.7% in 2013 – weaker than the double-digit rates regularly seen in the decade before 2007, but still robust.