Newspaper article International Herald Tribune

Slower Growth Forecasts in Asia ; Chilly Investment Climate Hits Developing Countries as Cash Flows Elsewhere

Newspaper article International Herald Tribune

Slower Growth Forecasts in Asia ; Chilly Investment Climate Hits Developing Countries as Cash Flows Elsewhere

Article excerpt

The Asian Development Bank now expects developing Asia to grow 6 percent this year and 6.2 percent in 2014, down from earlier forecasts of 6.6 percent and 6.7 percent.

The Asian Development Bank lowered its growth forecasts for emerging nations in the region on Wednesday and called for more structural changes to support the local economies.

In its twice-yearly economic overview of developing Asia -- which includes India, China, the Philippines and Vietnam, but not Japan -- the bank said it now expected the region to grow 6 percent this year and 6.2 percent in 2014.

Those numbers were down from 6.6 percent this year and 6.7 percent in 2014, which the development bank had projected in its previous report, in April. Last year, the region expanded 6.1 percent.

Much of Asia enjoyed a sharp rebound in the years immediately after the global financial crisis, buoyed by an aggressive stimulus program in China and the cash that flowed in as investors and businesses looked for higher returns than those available in the languishing U.S. and European economies.

Those drivers have faded since last year. China's economy has cooled as policy makers in Beijing have sought to put growth on a stable footing. And the prospect of reduced monetary stimulus in the United States, whose economy is perking up, has prompted an exodus of Western cash from emerging markets in Asia and elsewhere in recent months.

"Developing Asia is challenged to sustain its growth momentum as the pace in its two largest economies moderates," the Asian Development Bank said, referring to China and India. The "prospective tapering of quantitative easing in the United States destabilized emerging economy financial markets, including in developing Asia." At the same time, the bank said, the upturn in the U.S. economy and signs that the euro zone and Japan are turning the corner have "yet to translate into revived orders for exports from developing Asia."

India, where poor infrastructure, crippling bureaucracy and policy squabbles have long presented huge barriers to doing business, has been hit especially hard by the souring investor sentiment toward emerging markets. A sharp drop in the rupee since May has made some of the challenges facing the economy worse, many analysts have warned, and the biggest downward revision the Asian Development Bank made in its update on Wednesday was to the India forecast. …

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