The growth is expected to be led by services and accelerating industrial production, though interest rates are likely to move up over the year and fears of over-heating are likely to result in higher domestic prices. “The Asia-Pacific region has been the engine for overall global growth with the developing economies in the region accounting for more than one-third of global growth in 2006. We forecast relatively softer growth across the region at 7.4 per cent compared to 7.9 per cent last year, but expect the economic dynamism of the recent years to continue. The growth will be led mainly by China, India and Japan though there are concerns of a new downturn in Japan’s economy and overheating in China,” said ESCAP Executive Secretary Kim Hak Su. He added that India would do well in the long-term if its economy is led by services and not exports.

The problem of inflation, which has the government in knots here, is not likely to be a major concern in the Asia-Pacific region this year. For developing economies in the region, inflation is projected at 3.8 per cent, down from 4.6 per cent in 2006.