Inflation, monetary control and the U.S. economy drag Asia down

Asia’s growth tigers are mellowing down according to the revised statistics on the regions growing economies released by the Asian Development Bank. According to the bank, The slowdown in the U.S. economy is now gradually impacting Asia’s developing nations which are expected to grow at 7.5 percent this year, the slowest growth in the region since 2003. The ADB also slashed the 2009 growth forecast to 7.2 percent from the previous 7.8 percent as it said the global slowdown, high inflation and tight monetary policy would cut back on expansion.

Reuters quoted the report - “If the sub-prime crisis worsens significantly, Asia is bound to suffer much more serious financial effects, including an abrupt reversal of the capital inflows that have held up well so far.” Experts also believe that the decline of the U.S. economy, could change global war politics and influence trade thereby slowing the rapid pace of globalisation we have witnessed in the least few years.

Inflation which is the greatest risk in emerging economies in Asia is expected to reach 7.8 percent in 2008, a sharp increase from a forecast of 5.1 percent made in April. Next year, inflation is likely to come in at 6.0 percent, according the the ADB.

The ADB maintained its 2008 growth forecast for China, the world’s fastest growing big economy, at 10 percent but said India was likely to expand only at 7.4 percent against the April forecast of 8.0 percent.

In 2009, China is seen growing 9.5 percent and India 7.0 percent.