MANILA, Oct. 3 (UPI) -- The Asian Development Bank, noting weaker economic activity in China and India, cut its 2013 Asian growth forecast to 6 percent from its earlier 6.6 percent.
The bank, based in Manila, also cut its forecast for the region for next year to 6.2 percent from its April forecast of 6.7 percent. The region's growth last year was 6.1 percent.
"Softer than expected economic activity in the People's Republic of China and India and jitters over the United States quantitative easing program will weigh on Asia and the Pacific's growth prospects in the near term," the ADB said in its latest report.
Asia and the Pacific 2013 growth will come in below earlier projections due to more moderate activity in the region's two largest economies and effects of QE nervousness, the bank's chief economist, Changyong Rhee, said.
While economic activity will edge back up in 2014, current conditions highlight the need for the region to exercise vigilance to safeguard financial stability in the short term while accelerating structural reforms to sustain economic growth in the longer term, the report said.
The bank said shifting expectations on the timing of the tapering of the U.S. Federal Reserve's QE program set off the recent exodus of foreign capital from emerging markets, including India and Indonesia.
While the sudden outflow of capital exposed vulnerabilities in the region, the ADB report said fears of a crisis are unwarranted given the solid current account surpluses and ample foreign exchange reserves in most of the region's developing economies.
However, capital flow volatility underscores the need to closely monitor financial markets. At the same time, slowing growth highlights the need to push ahead with overdue reforms to sustain growth for the long term.