The Update to ADB’s flagship annual economic publication, Asian Development Outlook (ADO) 2009, said despite a slowdown from 2008, growth was robust in the first half of 2009 (according to official statistics) at 8.2% year-on-year. “Since construction activity is expected to slow in the second half, the Update maintains the ADO 2009 growth projections of 7.0% in 2009 and 6.5% in 2010”, the report said.

The Government responded early to the global downturn and to reduced commodity export prices by putting into place a large-scale anticrisis fiscal expansion programme that is yielding positive results.

The central bank’s US$400 million recapitalization of six major commercial banks spurred lending in rural areas. Moreover, the Government set up a US$600 million investment programme, financed by the Fund for Reconstruction and Development (the country’s sovereign wealth fund).

Investment contributed to 9.9% growth in industrial output and 142% growth in construction services in the first half of 2009. Official statistics indicate that inflation in the first 5 months of 2009 was 4.5%, below the Government’s annual forecast of 7.9%, the report said.

Global disinflation in consumer goods prices and a state-imposed cap on increases in utility tariffs helped alleviate price pressures. The Update maintains its 2009 forecast at 12.5%, while revising down the 2010 forecast from 13.0% to 11.0%.

The trade surplus narrowed as a result of a 4.8% decline in exports and a 24.1% increase in imports during the first 5 months of 2009. Imports rose due to higher demand for capital goods caused by intensified public and private infrastructure development. However, it is expected that rising demand for gas in Europe and a continuing high gold price will boost exports in the second half of 2009, allowing the country to sustain a strong trade surplus.

The Update maintains the ADO 2009 current account surplus forecasts of about 11.0% of GDP for 2009 and 2010.