Asian economies set to rebound but recovery still fragile

Manila-based lenders warn Asia’s economies are still ‘vulnerable to shocks’ The Asian Development Bank (ADB) said the region's emerging economies would pick up this year but warned that the recovery remained fragile because of the eurozone crisis and tensions in Asia. The Manila-based lender said in its latest forecast that the uptick in China's economy and "robust growth" in Southeast Asia would lead expansion in the region, which would be also boosted by strong domestic consumption.
The ADB estimated that the gross domestic product (GDP) for developing Asia, which covers 45 nations, was set to grow at 6.6 percent this year before edging up to 6.7 percent in 2014.
The region's growth slowed to 6.1 percent last year -- the lowest since 2009 when it saw 6.0 percent expansion.
"Developing Asia's recovery phase remains vulnerable to shocks," the bank said in its Asian Development Outlook report.
"Strong capital inflows could feed asset bubbles. Political discord surrounding fiscal debates in the United States, austerity fatigue in the euro area, and border disputes in Asia could jeopardise macroeconomic stability."
The ADB said growth was expected across the region, with China's GDP forecast to expand at 8.2 percent this year, up from 7.8 percent last year, on strong domestic demand and a better export performance.
South Asia's growth would turn around after two years of softening, it said, with powerhouse India forecast to see its GDP rise from last year's 5.0 percent to 6.0 percent this year.
"India has considerable potential, but its future performance relies on resolving contentious structural and policy issues that inhibit investment," the bank said.
The stronger economic activity expected for this year however would spur renewed price pressure, with inflation expected to rise from 3.7 percent in 2012 to 4.0 percent this year and 4.2 percent next year.
"These pressures remain manageable for now, but will need to be monitored closely, especially as strong capital inflows raise the spectre of potential asset market bubbles," the report said.
Southeast Asia would continue to shine on robust private consumption and increased intra-regional trade. Its GDP is set to expand at 5.4 percent this year.
An ambitious plan by the Association of Southeast Asian Nations regional bloc to create a common, barrier-free market by 2015 would encourage even higher growth and help to diversify its market, the ADB report noted.