Asian economies will deliver strong growth in 2006
07 Apr '06
3 min read
In India, growth surged to 8.1 percent in 2005, underpinned by strong performances in industry and services, and a rebound in agriculture from a weak performance in 2004. Although South Korean growth slipped in 2005, consumption demand recovered in the latter part of the year to lift the annual average to 4 percent.
India has ambitions to lift its growth rate to over 9 percent in the medium term. This is likely to require an increase the ratio of its investment to GDP and that it raise capital productivity. Both will need determined reform efforts, ADO says.
India's economy is forecast to grow 7.6 percent in fiscal year (FY) 2006 and 7.8 percent in FY2007, slightly below the expected medium-term rate of growth. The fuel price adjustment process will hold growth, particularly in consumption and investment, back, which is likely to boost inflation. Rising interest rates will have some modest negative effects on investment, ADO says.
In Southeast Asia, overall growth is expected to change little from the 5.5 percent expansion in 2005, but with a checkered pattern across countries. Indonesia's growth may slow in 2006 as domestic demand is pinched by higher interest rates, but Thailand's economy should recover as the impact of the tsunami and a bad agricultural harvest in 2005 recede.
Developing Asia's trade surplus with the rest of the world widened by $52 billion in 2005 to $192 billion, with the PRC's trade balance alone widening byabout $74 billion.
In Southeast Asia, an overall rise in the current account surplus disguised a widening trade deficit in both the Philippines and Thailand. Central Asia posted a 75 percent increase in its trade surplus as a result of higher oil prices, and in South Asia trade deficits widened in all countries but Nepal.
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