TOKYO, Sept 12: Inflation rather than an economic slowdown is the greatest risk and biggest policy challenge for developing countries in Asia, the head of the Asian Development Bank said on Friday.

ADB President Haruhiko Kuroda said the Manila-based agency would lower slightly its 2008 average growth rate forecast for developing Asia -- as it defines Asia excluding Japan, Australia, and New Zealand -- from its 7.6 per cent estimate in April.

Next week the ADB is due to issue updated growth and inflation forecasts for Asia, which were estimated in its annual economic outlook report in April.

The ADB will probably project some seven per cent growth for developing Asia in 2009, down from 7.8 per cent estimated in April, Kuroda said.

“While global growth is rapidly slowing, the slowdown in emerging economies in Asia has been relatively modest. On the other hand, inflation is accelerating rapidly,” Kuroda told Reuters in an interview.

He added that the ADB would revise up its inflation forecast for developing Asia to around 7-7.5 per cent this year from 5.1 per cent seen in the April report.

But he said he hoped the inflation rate would slow to around five per cent in 2009, depending on recent falls in commodity prices or monetary tightening measures in some countries.

“Inflation is the greatest risk in emerging economies in Asia,” Kuroda said, adding while it has peaked out in China, South Korea and Thailand, it is accelerating in countries like Vietnam and Pakistan.—Reuters