Emerging Asian economies will experience flat growth this year before recovering in 2013, the Asian Development Bank (ADB) said in a regional report released Wednesday.

The Asian Development Outlook report for 2012 said the region was shifting toward a "more sustainable long-run growth path" based on strong domestic demand instead of exports, which have been hit by wobbly Western demand.

But the study also warned that the region's rising wealth was fuelling inequality and income disparities, with the underprivileged at risk of being sucked into a "vicious circle" of poverty and neglect.

The vast region's gross domestic product (GDP) growth will "cool somewhat" to 6.9 percent in 2012, down from 7.2 percent last year, before edging higher again to 7.3 percent in 2013.

"Despite the weak global environment, developing Asia's growth momentum continues," it said.

"Strong domestic demand provided necessary support in 2011, and this will need to continue in light of the soft export demand expected from the major industrial economies of the United States (US), eurozone, and Japan."

Even with a slowdown this year, developing Asian economies would easily outshine Europe, the United States and Japan where output is forecast to grow only 1.1 percent this year and 1.7 percent in 2013, the report said.

"Continued uncertainties in the eurozone and a further slump in global trade pose the biggest threats to the growth outlook," ADB Chief Economist Changyong Rhee said in a statement.

"At the same time, Asian economies are gradually diversifying into new markets, private consumption is trending up and the region has limited direct financial exposure to the eurozone -- which should help sustain its momentum."

The stronger trend in domestic consumption -- in a group of countries known for high savings rates -- could be seen in the region's current account surplus, which fell to 2.6 percent of GDP from four percent in 2010.

The report covers most economies in Asia except Hong Kong, Japan, Singapore, South Korea and Taiwan. The countries account for more than 80 percent of Asia's population.

Inflation was a concern for the region last year until the eurozone debt crisis and the patchy recovery in the United States sapped demand for exports, forcing policy-makers to worry more about growth.

The ADB said prices had eased but remained a "potential threat", especially given the volatility of food and fuel costs.

China, the world's second biggest economy, would see growth moderate to 8.5 percent this year and 8.7 percent in 2013, compared with 9.2 percent in 2011.

The region's other emerging giant, India, would post 7.5 percent growth in 2012.

Southeast Asia's GDP would expand 5.2 percent this year from just 4.6 percent in 2011, thanks largely to Thailand's recovery from last year's devastating floods.

The report said Asia had "lifted people out of poverty at an unprecedented rate" over the past few decades, but its recent growth had been characterised by widening income disparities between the super-rich and the rest.

If the spoils of growth had been more evenly shared and inequality rates had remained stable, another 240 million people -- or 6.5 percent of developing Asia's population -- would have moved out of poverty between 1990 to 2010.

Rhee said rising inequality is a concern for Asia -- cited as a successful example of high growth with low inequality in the 1970s -- as many African and Latin American countries have witnessed a decline in such divide.

"What we are worrying about is that if this trend continues Asia may lose one of our strong points," he told reporters in Hong Kong.

"Rising inequality can weaken the basis of growth by undermining social cohesion -- you can think of the Arab Spring -- and worsen the quality of governance," he warned.

The ADB recommended measures including greater spending on health and education, cutting fuel subsidies and broadening the sources of tax revenues to address rising inequality.

The Daily Star/Bangladesh/ 12th April 2012