Growth in Asia will be cut in half this year, bank says

HONG KONG -- The global economic crisis will snap growth almost in half across Asia this year and damage the region's richest economies most, the Asian Development Bank predicted Tuesday.

The Manila-based development agency predicts that 44 poor Asian countries will together eke out 3.4% economic growth this year, slowest pace since the region's 1997-98 financial crisis and down from 6.3% in 2008.

China's economy will slow to 7% growth this year from 9% in 2008; and India's will decelerate to 5% growth this year from 7.1% in 2008, the bank says.

The region's wealthiest economies, dependent on shriveling exports to the USA and Europe, won't grow at all in 2009: Japan's economy will contract 3.5%; Singapore's 5%; Taiwan's 4%; South Korea's 3%; and Hong Kong's 2%, according to the ADB forecast.

"The short-term outlook for the region is bleak," says Jong-wha Lee, the bank's acting chief economist. Regional growth is expected to rebound in 2010, though Lee admits "there are downside risks."

Sixty million Asians who would have escaped poverty this year if growth had remained strong will be stuck below the poverty line — earning less than $1.25 a day, the development bank says.

That grim forecast was backed up by news out Tuesday. Japan reported a bunch of bad numbers for February: The jobless rate rose to a three-year high 4.4%; housing starts tumbled 24.9% from a year earlier; and household spending slipped 1% from a year earlier. In Thailand, industrial production dropped nearly 20% and private consumption fell more than 7% in February from a year earlier.

"Thailand — and the rest of Asia for that matter — look unlikely to face a v-shaped recovery and surge out of the current slump," writes Moody's Economy.com analyst Daniel Melser. "The Thai economy is more likely to experience a prolonged u-shaped recession, where the economy faces a protracted period of negative growth before finally recovering."

The odd thing: Asia appeared to be in good shape as the worldwide crisis deepened last fall. The region's banks, once its weak link, had strengthened their balance sheets. In 1999, for instance, more than 7% of Hong Kong bank loans were non-performing, compared with just over 1% now.