Asian economies may expand at a slower pace than earlier forecast as Europe struggles to resolve its debt crisis, according to Asian Development Bank Managing Director General Rajat Nag.
“There are significant worries on the horizon for Asia due to the European crisis,” Nag told reporters in Mumbai today. “There certainly will be a knock-on effect. Asia will be affected. How much will depend on how soon the Eurozone crisis is solved.”
Europe’s failure to contain its debt crisis and a faltering U.S. recovery have hurt Asian exports, trimmed expansions from China to South Korea, and prompted policy makers in the Philippines, Indonesia and Malaysia to avoid raising interest rates or start cutting borrowing costs. Asian stocks rose today as new leaders in Italy and Greece pledged to battle the crisis.
The ADB estimated in September that Asia excluding Japan will expand 7.5 percent in 2011 and 2012.
“We had made our forecast based on the assumption that there will be an orderly resolution of the European crisis,” Nag said. “Those forecasts are now getting more clouded because of the Euro crisis.”
Nag said that while Asia’s low public debt, high reserves and low fiscal deficit would shield the region to some extent, it was not immune to the Eurozone crisis.
The ADB may revise its growth forecast for Asia earlier than April, Nag said.
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