ADB expects 7.7% Asian growth this year

Manila: The Asian Development Bank raised its 2006 regional forecast on Wednesday largely due to sizzling growth in China and India, but warned countries were at risk from possible misjudged rate moves in Europe and the United States.

The bank expected the Asian economy, excluding Japan, to expand 7.7 per cent this year compared to 7.2 per cent in an earlier assessment in April and up from 7.6 per cent in 2005.

Growth of 7.1 per cent was projected for 2007, marginally higher than an initial forecast of seven per cent but below 2006's clip, due to expectations that demand from the United States and the European Union will ease and oil prices will remain high.

ADB chief economist Ifzal Ali said the biggest risk facing Asia was the possibility of mistimed rate decisions in the US and the eurozone, which could hit demand for their output. "Growth is slowing so the risk of policy error is very high now," Ali said in an interview.

"If you make a wrong call, it could either bring growth down very sharply or it could stoke inflationary pressures very significantly."

Ali also said the region faced greater risk from global current account imbalances and warned against complacency in the fight against bird flu, which many experts fear could snowball into a human pandemic that might kill millions of people.

"It has not spread from human to human and because of that maybe we are becoming a little complacent that it is not going to happen."

In China, the ADB sees booming exports and investment helping to push growth to 10.4 per cent in 2006 from an initially forecast 9.5 per cent. China expanded 10.2 per cent in 2005 from a year ago.

Despite Beijing's attempts to rein in its economy, the ADB raised its forecast for 2007 GDP growth to 9.5 per cent from 8.8 per cent due to a likely increase in public spending ahead of the 17th Communist Party Congress and in the leadup to the 2008 Olympics.

India, which along with China accounted for over 50 per cent of regional GDP, is expected to grow 7.8 per cent this year, up from an original forecast of 7.6 per cent growth as strong domestic demand is buoyed by rising investment. India's economy expanded 8.4 per cent in 2005.