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Updated Friday, January 27, 2012 0:01 am TWN, By Edith M. Lederer, AP

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Asia to power world economy: ADB

“If the situation further deteriorates seriously, that could affect Asia,” Kuroda said. “So I really hope that the European financial crisis can be overcome.”

Nonetheless, Kuroda predicted that China will continue to lead Asia's growth in 2012, expanding its economy by more than 8 percent, followed by India at between 7-8 percent and Indonesia at around 6.5 percent.

The Asian Development Bank, or ADB, has 48 members and while most developing countries have a strong financial sector and reasonably good public sector, some have serious fiscal deficits like Pakistan, where huge floods have devastated the economy, he said.

It has experienced double-digit inflation in the last two years and growth of only about 3 percent.

The ADB has been providing loans and grants, totaling US$17 billion in 2011, to nearly 40 developing countries including Pakistan, 14 Pacific island countries with economic growth rates of about 3-4 percent, as well as Vietnam, Laos, Cambodia, Nepal, Bangladesh, Afghanistan and others, he said.

Despite “extreme difficulties,” Kuroda said, “Afghanistan has made significant progress.”

“The average growth rate in the last 10 years or so in Afghanistan has been around 9 percent,” spurred by major assistance from the United States, European Union, Japan and the ADB, he said.

With foreign forces scheduled to complete their pullout in 2014, he said, “economic aid must be increased so as to maintain the momentum of economic growth, of social development, and the momentum of democracy in Afghanistan.”

“It's not easy but I am hopeful that the international community will continue to assist Afghanistan,” Kuroda said.

As for his native Japan, the ADB chief said two things could affect the economy in coming years — the exchange rate and electricity costs.

The yen is very strong and high exchange rates affect the Japanese manufacturing sector, he said.

“Hopefully in coming months the yen could more or less stabilize,” he said.

Last year's earthquake and tsunami created power shortages and electricity costs went up “and are likely to rise further” which could also affect the Japanese manufacturing sector, Kuroda said.

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