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| Edited By: |Source: Reuters |Updated: Mar 17, 2018, 02:08 AM IST
The Asian Development Bank hiked growth forecasts for developing economies in Asia on Tuesday, just three months after its previous forecast, but warned against any hasty withdrawal of stimulus packages.
The Manila-based multilateral bank said that regional economies should grow 4.5 percent on average in 2009 and 6.6% in 2010.
In September, the bank had forecast 2009 growth at 3.9% and 2010 expansion at 6.4%.
"Recent data reinforces ADB's impression that developing Asia can expect a V-shaped recovery from the global economic downturn," it said. "For many countries in the region, growth in the third quarter of 2009 has been higher than forecast."
However, the ADB warned that care must be taken in withdrawing economic stimulus packages.
"Within the region's capability, policies should remain accommodative to ensure a stronger foothold by strengthening domestic demand," it said. "At the same time, however, authorities should also plan workable exit strategies to unwind policy stimulus."
"If done too soon, recovery may be at risk; if too late, fiscal deficits and monetary expansion could become unsustainable and inflationary."
It said, however, that inflation remained muted for the moment and was likely to remain so, even while the recovery was taking hold. This had allowed authorities to maintain fiscal and monetary stimulus packages.
"In the medium-term, inflation could pick up in line with the general economic recovery and higher commodity prices," it said.
Risks to Asia's expansion included a short-lived recovery in developed economies and destabilising capital flows, it said.
"Faster recovery and higher growth in the region should attract more capital inflows, and limited exchange rate flexibility in the region could also encourage increased capital inflows, speculating on anticipated appreciation," it said.
"Yet, capital flows could destabilise the real economy. Changes in risk sentiment might lead to sudden capital flow reversals."
