Asia economies poised to recover but vulnerable: ADB

WASHINGTON (Reuters) - Developing Asia will recover from the global economic crisis before the rest of the world, but the region remains too dependent on external demand, the chief economist of the Asian Development Bank said on Wednesday.

Jong-Wha Lee said the Manila-based ADB has forecast Asia, excluding Japan, will post 6.4 percent growth next year -- high by world standards, but slower than the region led by China and India has experienced over the past decade.

"Developing Asia is set to emerge from the global slump ahead of the rest of the world," Lee said in a panel discussion at the Peterson Institute for International Economics.

"But the outlook still remains uncertain, especially the downside risk that may come from a protracted global slowdown," he said.

Healthy financial systems, effective monetary and fiscal stimulus measures and strong performance by China and other big regional economies helped cushion Asia from the global recession.

But the region's economies need to shift from export-led growth to domestic demand, both to cushion it from external shocks and to reduce the huge current account surpluses that contributed to global financial meltdown, he said.

"Asia cannot be the sole driver of its own growth and we still rely on external demand," Lee said.

Though the global crisis stemmed mainly from U.S. deficits, he said Asia has significantly contributed to these large current account imbalances.

And while U.S. deficits look set to come down dramatically this year, and China's surpluses would fall slightly, this will not be enough to clear the imbalances.

"We don't think this problem (will be) resolved in 2010. Significant risk to global economies will remain," Lee said.

The ADB recommended Asia's developing economies rebalance growth toward domestic and regional demand, spur consumption by developing financial markets and systems, nurture their middle classes and improve social security systems to discourage precautionary savings, Lee said.

(Reporting by Paul Eckert; Editing by Andrew Hay)