* Developing Asia to grow 3.4 pct in '09 vs 6.3 pct in '08
* May rebound to 6.0 pct next yr depending on global economy
* Use crisis as opportunity to rebalance growth, ADB says (Updates with background, new quotes)
By Raju Gopalakrishnan
MANILA, March 31 (Reuters) - Growth in Asia's developing economies will hit the slowest pace this year since the 1997/98 financial crisis, but the world's fastest growing countries may rebound in 2010, the Asian Development Bank said.
The forecast for 2010 was however contingent on a mild recovery in the global economy, and this was far from certain, the Manila-based ADB said in its annual Asian Development Outlook released on Tuesday.
The multilateral development bank also urged Asian countries to use the crisis as an opportunity to rebalance growth from their reliance on exports towards strengthening consumption at home as a way towards sustained growth.
"There are tremendous downside risks to this global outlook," ADB President Haruhiko Kuroda said in the report. "The effectiveness of the global responses to the crisis remains uncertain. Loud calls for protectionist policies are becoming worrisome. As job losses in the major industrialised countries continue, the protectionist voices may only get louder."
The ADB said Asia's developing economies, which include China, India, the economies of Southeast Asia, South Korea and Central Asia, should register average GDP growth of 3.4 percent this year, down from 6.3 percent in 2008.
It is its lowest forecast since growth averaged only 0.2 percent in 1998.
THAT SINKING FEELING
The ADB said average growth in Asia could recover to 6.0 percent in 2010 if big industrialised nations pull out of recession.
The forecasts by and large confirm a Reuters poll of economists earlier this month that showed that growth in Asia will fall sharply this year and could recover next year.
"The concern for the region, and especially for the region's poor, is that it is not yet clear that the United States, European Union and Japan will recover as soon as next year," said the ADB's acting Chief Economist Jong-Wha Lee said in the report.
As late as December, the ADB had forecast that average growth in Asia would reach 5.8 percent in 2009. But it said: "The global downturn is having a pronounced impact on the region's exports and subdued domestic demand will further crimp growth."
In line with the global response to the crisis, Asian central banks have slashed interest rates and governments are trying to spend their way out of the slump. Some are also trying to keep their economies flush with dollars through foreign exchange swaps.
Japan, for example, is to unveil a new stimulus package on Tuesday to create jobs and spur demand.
Structural changes to reduce Asia's reliance on exports will be key for the region's long-term growth prospects, ADB's Lee told journalists in Hong Kong on Tuesday.
Although the crisis started in the U.S. housing sector, the roots can be traced to years of global economic imbalances as part of which Asia's excess savings made their way to the U.S. debt markets and fed a spending binge.
"This may be the opportunity to rebalance our growth, to strengthen our domestic demand and revitalise the domestic economies," Lee said.
"If countries went back to business as usual at the end of this crisis there still would be the underlying global imbalances."
China, the world's fastest growing economy, will register growth of 7.0 percent this year, down from 9.0 percent in 2008, the ADB said. India should grow 5.0 percent in 2009 and 6.5 percent in 2010, the ADB said.
The economies of Hong Kong, South Korea, Taiwan and Singapore will all contract this year because of their dependence on trade to support growth.
The slowdown will deal a setback to poverty alleviation. In 2009, the number of poor will be 62.3 million higher at 728.2 million because of the slowdown, the ADB predicted.
Had growth continued as in 2007 and 2008, the number of poor in developing Asia would have been 665.9 million, based on a daily allowance of $1.25. (For the full ADB report see www.adb.org) (Additional reporting by Rafael Nam in HONG KONG; Editing by Jan Dahinten)