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Asia Development Bank (ADB) - ADO 2008 Update

Asia Development Bank (ADB) - ADO 2008 Update

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ASIAN DEVELOPMENT
Outlook
2008
Asian Development Bank
UPDATE
 
©  Asian Development BankAll rights reserved. Published .Printed in the Philippines.ISSN: -Publication Stock No. Cataloging-in-Publication Data. Asian Development Bank. . Economics, Finance. I. Asian Development Bank.Te annual
 Asian Development Outlook
provides a comprehensive economic analysis o  economies indeveloping Asia and the Pacic.Te views expressed in this book are those o the authors and do not necessarily reect the views and policies o the Asian Development Bank or its Board o Governors or the governments they represent.Te Asian Development Bank does not guarantee the accuracy o the data included in this publication andaccepts no responsibility or any consequence o their use.Use o the term “country” does not imply any judgment by the authors or the Asian Development Bank as to thelegal or other status o any territorial entity.ADB encourages printing or copying inormation exclusively or personal and noncommercial use with properacknowledgment o ADB. Users are restricted rom reselling, redistributing, or creating derivative works orcommercial purposes without the express, written consent o ADB. ADB Avenue, Mandaluyong City  Metro Manila, Philippinesel: +   Fax: +    www.adb.orgFor orders, please contact:Department o External RelationsFax: +   E-mail: adbpub@adb.org
 
Foreword
Faced with a decelerating global economy, turbulent nancial markets,and elevated commodity prices, the region o developing Asia is expectedto experience a slowdown in growth in 008 and 009. Tis
Update
to
 Asian Development Outlook 2008
(
 ADO 2008
), published in April thisyear, marginally revises down the orecast or the region’s growth or008 to .% rom the earlier .% orecast.In most economies in the region, growth has slowed. In the People’sRepublic o China, expansion moderated to 0.% in the rst  months o 008 rom the robust .9% seen in the same period o 00. Tis stemsrom the soening o external demand and the cumulative impact o monetary tightening in recent years. India, in the rst quarter o FY008(April–June), saw its slowest growth since 00 as ination and higherborrowing costs damped consumer spending and investment.Regional growth in 009 is expected to urther decelerate to .%,lower than the previous projection o .8%. Tis assessment, however, isless certain, primarily because the outcome depends both on the durationand extent o the current global downturn and the runup in commodity prices, as well as on how Asian economies respond to domestic andexternal shocks.Ination orecasts are revised signicantly upward as risingglobal prices o ood and uel have added to ination pressures acrossdeveloping Asia. Price increases started to accelerate in the second hal o last year. Te increases have not been limited to ood and uel prices, asrising raw materials costs pushed up manuactured goods prices as well.Wage pressures are also building up in many Asian economies. It is nowanticipated that the region will register an average ination o .8% in008 and .0% in 009.Te
Update
presents our thematic essays discussing the recentglobal commodity price rises and their impacts on developing Asia. Tey suggest that high international commodity prices are here to stay. Pricesare also expected to remain volatile, a combination
 
aecting the region’sgrowth prospects. One important nding is that in many countries,demand-pull rather than cost-push actors are causing high prices. Terole o monetary policy is thus still relevant in containing price pressuresand monetary authorities should impose requisite tightening measures toprevent ination rom becoming entrenched.However, monetary tightening is not without risks. Since theslowdown in the leading industrial economies will hit developing Asia’sexport and growth perormance, tightened monetary policy couldreinorce a contraction in the region even aer demand has already begunto slacken. Still, these risks should not be overstated. Te more urgentpriority or monetary authorities is to contain ination expectations.Te region’s growth prospects remain undamentally sound, evenaer the G slowdown is actored in. Tereore, these risks do notdiminish the broad policy message—that there has to be a reshiing o the basic monetary stance toward tightening throughout developing Asia.

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