Asian Development Outlook 2007 Update

Developing Asia's prodigious growth continued through the first half of 2007, setting the scene for another bumper year. The region is now expected to expand by 8.3. But this Asian Development Outlook 2007 Update cautions that the prognosis for 2008 is now hazy. Although growth in 2008 is seen slowing gently to 8.2%, the likelihood of a more abrupt deceleration is increasing. Exceptional performance in both the People's Republic of China (PRC) and India is again propelling growth in the region. In the first half of 2007, the PRC grew faster than at any time since 1994 and India, building on its best rate in 18 years in the year to March 2007, registered strong growth in April-June this year. Beyond the gyrations in the global economy, the Update stresses that developing Asia's growth prospects will continue to depend on how well it copes with its own domestic challenges. It is now much better placed to cope with adverse external developments, with its stout financial defenses and some room for policy adjustment. The Update looks at the dynamics of export performance in East Asia. It suggests that supply-side factors-including the quality of infrastructure and the business investment climate-play an important role export performance and that external demand remains an important driver of trade in parts and components. The role of the real exchange rate has changed overtime, as composition of exports has changed.