Emerging Asia's Growth to Slow to About 7%, ADB Says (Update2)

Emerging Asia's Growth to Slow to About 7%, ADB Says (Update2)

By Dinakar Sethuraman

June 25 (Bloomberg) -- Asia's emerging economies may grow at a slower pace this year than earlier forecast, Asian Development Bank President Haruhiko Kuroda said.

Asian economies excluding Japan and Australia may expand about 7 percent in 2008, Kuroda said in an interview in Singapore today. That would be lower than the ADB's April estimate of 7.6 percent, and last year's 8.7 percent expansion.

``We expect some economic slowdown in Asia this year but the growth will still be robust in emerging Asia,'' Kuroda said, when asked about the impact of high oil prices and accelerating inflation on the region's economies.

Surging food and energy prices are fueling runaway inflation in Asia, leaving consumers with less to spend and threatening growth from South Korea to the Philippines at a time when a U.S. slowdown is hurting demand for the region's exports.

Crude oil has doubled in the past year to reach a record $139.89 a barrel in New York on June 16. Higher fuel prices contributed to India's 11.05 percent increase in wholesale prices in the first week of June, the fastest in 13 years.

Inflation in China accelerated to 8.1 percent in the first five months from 4.8 percent for all of 2007 and may worsen after the government increased the price of gasoline and diesel by at least 17 percent last week.

Rising consumer prices have led to higher borrowing costs around the region, as authorities in India, Vietnam, Indonesia and the Philippines moved to cool inflation.

`Constrict Growth'

``Inflation concerns are leading central banks to hike interest rates and that will definitely constrict growth,'' said Philip McNicholas, an economist at IDEAglobal in Singapore.

The International Monetary Fund in April cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression.

Still, Asian economies need to speed up infrastructure development to keep pace with current growth rates, Kuroda said at the World Cities Summit in Singapore today.

``For most major cities in Asia, growth rates are too rapid for their infrastructure to keep up,'' Kuroda said. ``Each year there's a $30 billion shortfall in urban infrastructure investments.''

The ADB was formed in 1966 to improve the welfare of people in the Asia and the Pacific. The group comprises 67 member countries, both from within and outside of the region.