Regional Economic Outlook: Asia and Pacific, 2007

Economic developments in Asia have been positive so far in 2007. Growth has been stronger (and in many cases more balanced) than expected across much of the region, again led by China and India, and inflation pressures remain largely contained. Moreover, Asia weathered the recent financial turbulence relatively well. The outlook is favorable, with growth expected to decline only modestly in 2008 as foreign demand for Asia’s exports slows. The main risk for the region is a sharper-than-expected global slowdown.

Executive Summary:

Economic developments in Asia have been positive so far in 2007 (Chapter I). Growth has been stronger than expected across much of the region, with domestic demand making an increasing contribution in a number of economies. Exports have remained an important driver of activity, notwithstanding a relatively weak performance from electronics. China and India continued to lead the way, with high growth backed by strong investment (although the contribution of net exports to growth in China continues to rise). The pace of activity in the NIEs and ASEAN-5 remained solid, with strong investment in the former and strong consumption in the latter. In industrial Asia, GDP contracted in Japan in the second quarter on lower capital expenditure, but this is likely in part to reflect data problems, while Australia and New Zealand continued to enjoy strong, broad-based growth.