THE Asian Development Bank's Asian Development Outlook predicts growth in Asia to ease to 6.9 per cent in 2012 before picking up to 7.3 per cent in 2013.
Released this week, the report stated that the region's gross domestic product (GDP) moderated to 7.2 per cent in 2011, down from the 2010 post-global financial crisis rebound pace of 9.1 per cent.
Private consumption continues to contribute to Asia's growth.
However, investment weakened significantly in 2011 in export-led economies such as the People's Republic of China (PRC); Hong Kong, China; Republic of Korea, Malaysia; and Taipei, China.
The outlook is of the view that the continued uncertainty in the eurozone posed the greatest risk for the global outlook. Countries in the eurozone periphery still feel the pressure of high debts, and fiscal austerity is cutting into growth, undermining efforts to reduce debt-to-GDP ratios.
Asia, it said, is facing an extended period of low European demand for its exports.
"In the absence of any sudden shocks, effects on developing Asia's financial stability and trade flows can be managed. Asia's relative lack of financial integration with the eurozone will shield it from financial contagion," the report said.
The Pacific economies are relatively insulated from international developments. Papua New Guinea's robust growth lifted the Pacific region to 7 per cent GDP growth in 2011-the only subregion in developing Asia, which posted higher growth over the year earlier. Yet, the Pacific as a whole is forecast to slow to 6 per cent in 2012 and further to 4.1 per cent in 2013, the report said.
However, the report said that if inequality had remained stable instead of increasing as it has since the 1990s, then the levels of growth recorded in the region over the past 20 years would have lifted around 240 million more people out of poverty
"Developing Asia is no longer a region of growth with low inequality. The 1990s and 2000s saw income disparities expanding in the economies that account for more than 80 per cent of the region's population-despite the region's world-beating performance raising average incomes and reducing poverty," the report stated.
"Inequality widened over the past two decades in the three most populous countries-PRC, India, and Indonesia-which have been the drivers of the region's rapid growth. Taken as a whole, developing Asia's Gini coefficient went from 39 to 46 in that period.
"The richest 1 per cent of households accounted for 6 per cent to 8 per cent of total income while close to 20 per cent of total income went to the top 5 per cent in most countries. The share of income accruing to the richest households has increased in the 2000s.
"Inequality of opportunity contributes significantly to the widening income inequality in developing Asia. These two forms of inequality lead to a vicious circle as unequal opportunities create income disparities, which in turn lead to huge differences in future opportunities for individuals and households.
"Moreover, inequality can weaken the basis for growth itself. High and rising inequality can curb medium-term growth by reducing social cohesion, undermining the quality of governance, and increasing pressure for inefficient populist policies.
"To address inequality, policymakers in developing Asia need to spend more on education and health ù introduce better targeted social protection schemes ù reduce or eliminate general price subsidies; broaden the tax base; create more productive jobs and assist lagging regions."