Asian Development Bank warns on “growing danger” of eurozone crisis

Growth in emerging Asia is being placed at risk by the economic problems plaguing the developed West, according to the Asian Development Bank.

The bank’s latest Asia Economic Monitor predicts that emerging Asia’s GDP will grow by 7.2% in 2012, which is a reduction on its previous estimate of 7.5%. Growth is still forecast to be 7.5% this year.

The eurozone debt crisis could cause investors to cut their holdings in emerging Asia because of heightened risk aversion, the study says, while tighter credit conditions will be created if European banks cut lending. These factors will curtail emerging Asia’s growth next year.

In addition, the report claims that the ten ASEAN economies – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam – would grow by just 5.4% in 2012 if the eurozone and the US are hit by recessions as severe as those of 2009.

Iwan Azis, head of the Asian Development Bank’s office of regional economic integration, says: “The turmoil emanating from Europe poses a growing danger to trade and finance within emerging east Asia.

“The region’s policymakers must be prepared to act promptly, decisively, and collectively to counter what could be an extended global economic slowdown.”

Last month, the Organisation for Economic Cooperation and Development warned that the average growth rate of Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam could fall to 5% this year, down from the 7.6% recorded in 2010.

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