Asia economically dynamic despite crisis - ADB

SEOUL, South Korea (AP) – Asia will take a substantial hit from slowing demand for its exports as the global downturn unfolds but will remain the world’s most economically-dynamic region, an Asian Development Bank (ADB) economist said Tuesday.

“The growth rate will decline but Asia will maintain the highest growth in the world,” Jong-Hwa Lee, head of the Manila-based development lender’s office of regional economic integration, told reporters.

Lee would not reveal the bank’s 2009 forecast or for individual countries ahead of their scheduled release early next month. He said that Asia excluding Japan grew about nine percent last year and that there are expectations for about 7.5 percent growth this year.

“Everyone now understands external demand will decline substantially, not only in (South) Korea but in China and India,” Lee said. “The question is how to strengthen domestic demand and this is the real challenge.”

He said countries that can take steps such as cutting interest rates and taxes and increasing money supply and government spending “have some room to increase domestic demand” and “may avoid substantial negative impact from the global slowdown.”

China, Japan and South Korea have announced stimulus measures to boost their slowing economies, with Beijing unveiling a 4 trillion yuan ($586 billion) package.

Lee was in Seoul for the release of the bank’s Asia Bond Monitor report, which said resilient local currency bond markets can serve as an important source of funding for governments as they boost public spending.

The ADB report, issued twice a year, examines local currency bond market developments in the 10-member Association of Southeast Asian Nations, China, Hong Kong and South Korea.

It said that growth in the region’s local currency bond markets slowed in the first half of 2008. As of the end of June, outstanding local currency bonds totaled $3.7 trillion, up 8.1 percent from the end of 2007.

The report said that though foreign investors have abandoned regional stock markets because of the global credit crunch, local currency bonds have held up “in stark contrast to the wholesale repatriation of foreign investor capital during the 1997-98 Asian financial crisis.”

The Asian Development Bank, established in 1966, helps finance projects aimed at poverty reduction. In 2007, it approved $10.1 billion in loans and another nearly $1 billion in grants and technical assistance.