New Delhi, Jan 10 (UNI) A United Nations Economic Report today described India as the engine of growth in the South Asian Region and projected its economy to grow at 8.2 per cent in 2008.
The Report noted that India's economy grew by more than 8.5 per cent for the fourth consecutive year in 2007.
The Report entitled 'World Economic Situation and Prospects' is produced at the beginning of each year jointly by the UN Department of Economic and Social Affairs (UN DESA), the United Nations Conference for Trade and Development (UNCTAD) and the five UN regional commissions.
It noted that budget deficits remain high in region and in the regard, states that India runs a Budget deficit of 3.5 per cent of GDP.
The Report projected South East Asia's economic growth to moderate to 7.7 per cent in 2008, a slight decline from 8.4 per cent in 2007.
The Report, however, said there were some downside risks to the growth performance of the economies in East Asia.
The current sub-prime mortgage market in the United States could cause problems for credit market and financial institutions in the regions.
Political tensions, uncertain weather and volatility of oil prices are major sources of uncertainty for the region, it said.
Further increase in oil prices could slow down economic growth, raise inflation and cause problem for macroeconomic balances.
The Report saw escalation in political tensions during election year in Bangladesh and Pakistan in 2008 as additional downside risks.
China, with its 11.4 per cent Gross Domestic Product (GDP) growth, has continued to lead economic expansion in the Asian region through vigorous investment spending and rapid export growth in 2007.
Government measures to cool the booming Chinese economy and an expected deceleration of export demand is expected to trim GDP growth to 10.1 per cent in 2008, the Report said.
The Report said the economies of Bangladesh, Pakistan and Sri Lanka also witnessed good performance and are expected to reach GDP growth of 6.2 per cent or more. Strong performances in industry and services, increased domestic investments, which grew by more than 20 per cent in 2007 in Pakistan- and recovery in agriculture greatly contributed to growth in these economies.
"Pakistan's growth performance in 2008 is surrounded by great uncertainty, however, in the light of the recent political turmoil following the Bhutto assassination," the report said.
Iran, the sole net oil exporter of the region, is expected to have a 4.8 per cent growth, mainly fuelled by the high oil prices.
The Asian economies would, however, maintain growth momentum in 2008 amidst uncertain environment The Report said growth was robust in other East Asian countries in spite of a more challenging external environment stemming from the slowdown of United States economy and the significant appreciation of local currencies against the dollar.
The currency appreciation and reduced global demand, affected exports of price-sensitive, labour-intensive manufacturing products, such as textiles and apparel and furniture, as well as of agricultural commodities.
The Report said many countries have taken measures to reduce their dependency on fluctuations in world markets. Hong Kong Special Administrative Region (SAR) of China, Indonesia, Malaysia, the Philippines and Taiwan Province of China were able to ease the impact of weakening demand for their exports by increasing domestic consumption and private and public investment.
Vietnam was also able to sustain its growth through an increase in domestic demand, while Singapore successfully moved to high value-added export. Thailand's economic growth weakened from five per cent in 2006 to 4.5 per cent in 2007, as private domestic consumption and investment weakened amidst political uncertainties.
The country's economic outlook is expected to improve slightly in 2008, with GDP growth reaching 4.8 per cent, assuming that political uncertainty would dissipate in the wake of the recent elections, the Report says.
It said inflation has remained in check across the region.
Increasing import costs caused by rising international oil and food prices have been mitigated by currency appreciation in most economies. Inflation in China nonetheless accelerated from 1.5 per cent in 2006 to 4.9 per cent in October 2007, surging food prices pushed up China's consumer price index (CPI) by as much as 6.5 per cent.
South Asia also seemed to maintain its strong growth in 2008 with an expected GDP growth of 6.7 per cent; a slight deceleration from 6.9 per cent in 2007.
The Nepalese economy was expected to recover in the wake of cessation of hostilities among rival political groups. However, growth remained low at 2.6 per cent in 2007 in part because of residual unrest in some parts of the country but also because of low investment and poor agricultural performance. However, the current peace process in the country has improved the economic prospects.
Nepal is expected to have a GDP growth of 3.3 per cent in 2008 The Report acknowledged that unemployment estimates were not always reliable in the region; nevertheless current data suggest that economic growth is having a positive impact on unemployment. Both Sri Lanka and Pakistan have reduced their unemployment rates to 6.2 per cent.
In spite of these performances, inflation remains a major concern in most economies because of high prices on food, oil and imported commodities. In Sri Lanka, inflation was expected to reach 15.5 per cent in 2007 and in Iran 17 per cent. Although inflation remains stable in Pakistan and Bangladesh, it is nonetheless close to seven per cent. All the countries, with the exception of Iran, are implementing strict monetary measures to contain inflation; they are also trying to better control import of essential commodities.
Nevertheless, the World Economic Situation 2008 warns them to remain vigilant.
Budget deficits remain high in most countries, the Report argues.
This is a serious problem as the public debt is putting interest rates under pressure, and inflation is crowding out financial resources for investments. Bangladesh runs a budget deficit of about 3.7 per cent of GDP, Pakistan has 4.2 per cent and Sri Lanka 7.6 per cent. In most countries, trade deficits are also widening because imports are growing faster than exports.
UNI GS BDP AS1855