Asian Development Outlook 2007

The 19th edition of Asian Development Outlook examines trends and prospects in Central Asia, East Asia, South Asia, Southeast Asia, and the Pacific, in the context of global economic movements. It argues that despite an expected decrease in the pace of expansion in 2007 and 2008, growth will remain high. Net exports’ contribution to growth will soften, but strengthening domestic demand will fill part of the gap. In response to tightening measures and lower oil prices, inflationary pressures should start to recede. Current account surpluses will slowly begin to narrow as a share of GDP.

Macroeconomic stabilisation, structural rebalancing, and building markets and institutions to support future growth are seen as the biggest challenges facing developing Asia. Central to this is improving the policy, regulatory, and institutional environment in which businesses operate.

The edition shows that in most Asian countries, fostering both industry and services is the only viable development model. The following elements are crucial for this:

• investment that expands opportunities for productivity gains and provides infrastructure services that are vital for economies of scale and other benefits
• infrastructure services that are vital for economies of scale and other benefits
• institutions that lower risks and uncertainty for businesses
• markets that support labour mobility
• institutions that provide social protection.

A chapter on education and structural change examines links between education and changes in the structure of the economy.

The edition argues that recent developments have brought country risks to the fore. Security issues across Asia are unresolved. In some countries, important elections are scheduled, and their outcomes will be crucial for confidence. While any slowdown in global growth would adversely affect the volume of world trade, the failure of the Doha Round would make things worse. In this growing vacuum, preferential trade agreements would thrive and protectionist calls increase. The overall geopolitical and security situation remains a source of uncertainty. The price of strategic commodities, such as oil, could be hit by negative developments. In the event of a human flu pandemic, developing Asia would bear a disproportionately high cost.