ADB raises Asian growth forecast

The ADB predicts Chinese growth will slow to 10% this year

The Asian Development Bank (ADB) has raised its forecast for Asian growth, saying that stronger consumer spending will help offset weaker exports.

Average economic growth in Asia, excluding Japan, will now be 7.6% in 2007, compared with an earlier forecast of 7.1%, the bank said.

However, while growth is still strong, it is down from 2006's 8.3% figure.

The bank also said that Asian nations should do more with foreign exchange reserves, using them to fight poverty.

Reduce poverty

The ADB points out that India and China have the largest numbers of poor people in the region but also the highest level of foreign exchange reserves.

These projections imply that growth will move onto a more sustainable footing ADB

Asia excluding Japan has almost $2.3 trillion (£1.2 trillion) in foreign exchange reserves, most of which are invested in short-term, low-yielding assets.

The ADB says that only half of that is needed to deal with trade and debt requirements, which leaves more than $1 trillion that could be invested in assets providing a better return that could be used to fight poverty.

ADB chief economist Ifzal Ali accepts that the investments "are not risk-free".

"As a result, I think both governments and central banks will be quite cautious on the pace at which they will pursue this particular initiative."

The ADB said that growth in China also would come under pressure, dipping to 10% this year from 10.7% in 2006.

"These projections imply that growth will move onto a more sustainable footing and that overheating pressures that surfaced in 2006 will begin to abate," it said.