Nikkei opens higher but gains may be temporary

Nikkei opens higher but gains may be temporary

The Asian Development Bank is cutting its 2012 forecast for Asian region to 7.5 per cent from 7.7 per cent.

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  • Last Updated: September 14, 2011, 8:44 AM IST
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Hong Kong: Growing worries about weak demand from key trading partners including the US and Europe prompted the Asian Development Bank to announce on Wednesday that it is trimming its forecast for economic growth in developing Asian countries.

The ADB said on Wednesday it is lowering its 2011 growth forecast slightly to 7.5 per cent from 7.8 per cent previously for 45 developing or newly industrializing Asian countries, excluding Japan.

The bank is also cutting its 2012 forecast for the region to 7.5 per cent from 7.7 per cent.

The Manila-based lender said in an update to its annual Asian Development Outlook report that the slowdown in demand from the United States and Europe "continues to cast a cloud over the region," with export growth easing substantially in the second quarter in China and other leading economies.

"The main headwinds to the region's growth come from faltering prospects in the major industrial economies," the report said.

Economic growth in the US and Japan did not live up to earlier ADB forecasts, the report said. In the US, persistent high unemployment is dragging down private consumption while in Japan, the economy was showing signs of a slowdown even before the devastating earthquake and tsunami struck in March. Meanwhile in Europe, the sovereign debt crisis is putting pressure on an economic recovery.

However, growing domestic consumption, infrastructure investment and trade within Asia is supporting the region's economies.

Inflation also remains a "threat," with consumer price inflation predicted to average 5.8 per cent this year, up from 5.3 per cent forecast previously, before cooling off to 4.6 per cent in 2012.

Falling commodity prices and weak economies in major industrial countries will help lower inflation pressures but unless global economic activity falls sharply, inflation will remain a problem, the ADB said.

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