MANILA -- The economies of developing Asia are expected to grow 7 percent this year, equaling their performance of 2000, which saw the fastest growth since the Asian financial crisis (1997-98). Growth has been strong in all regions, particularly in East and Southeast Asia. Is this pace sustainable?
Asian growth has been driven by exports to industrial countries, growing intraregional trade and increasing consumer demand. But brakes are pressing against each of these three drivers. At the global, regional and domestic levels, emerging risks are likely to become more serious over the next two years, posing a danger to developing-Asia's economic dynamism. The era of high growth rates in gross domestic product, low interest and inflation rates, and strictly managed exchange rates could be ending.
The first risk stems from key macro-economic imbalances, particularly the unresolved budget and current account deficits in the United States. The persistence of these deficits could trigger sharp increases in interest rates and a considerable depreciation of the U.S. dollar.