Asian Development Outlook 2012 Update: Services and Asia's Future Growth

This Update shows whether these forecasts were met, explaining divergence between forecasts and the actual outturn, and firms the forecasts for the next 18 months or so.

According to this Update's findings, dimming global growth prospects and soft domestic demand in the region’s two largest economies are slowing the pace of developing Asia’s expansion. Growth is now expected to slide from 7.2% in 2011 to 6.1% in 2012, with a bounce back to 6.7% in 2013.

The possibility of a shock emanating from the unresolved euro area sovereign debt crisis or a sharp fiscal contraction in the United States pose the biggest downside risks to the economy. Fortunately, most developing Asian economies have room to counteract such shocks with fiscal and monetary policy. However, there is currently no regionwide need for countercyclical policy intervention.

In the medium term, continued weakness in external demand and moderated growth in the People’s Republic of China and India mean economies in the region must diversify their growth drivers. Service sector development is poised to play a critical role in the region’s future growth.

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