ADB sees crisis hitting Asia growth

By Peter Apps

LONDON (Reuters) - Financial crisis in the West will hit Asian growth particularly through manufacturing exports, a top Asian Development Bank official said on Friday, but the continent would continue to outpace other regions even in a global slowdown.

ADB Managing Director General Rajat Nag told Reuters that while growth predictions were constantly under review, Asia would still likely remain the fastest-growing world region even if the developed world slipped into recession, taking an ever larger share of the global economy.

"Decoupling is certainly a myth," he said. "What happens in the West certainly affects us. We cannot be complacent but at the same time the time has come for Asia to take a greater role in the world economy. We hope at least one part of the world can continue to provide growth."

He said each 1 percent fall in growth in the G3 economies would likely shave 0.3 to 0.5 percent from Asian growth. But he said Asian policymakers needed to also keep a focus on inflation and could afford to lose some growth to keep price rises under control.

Nag said Asian inflation had increased to 7.8 percent in 2008 from just over 5 percent the previous year and that demand was continuing to support prices.

"True, oil prices have come down to under $100 but we do not think that will last," he said. "Food prices have also fallen but we are only one supply shock from disaster. Overall, we can afford to sacrifice a little growth to keep inflation under control and policymakers should resist the temptation to loosen policy as growth slows."

Any slower growth in Asia would likely slow growth in demand for commodities, he said, but the overall demand itself would be unlikely to fall.