The Asian Development Bank (ADB) has scaled back its 2012 and 2013 growth forecasts for developing Asia, saying that after years of rapid growth, the region must brace for a prolonged period of moderate expansion amidst an ongoing slump in global demand.

"Developing Asia must adapt to a moderate growth environment, and countries will need to do more to reduce their reliance on exports, rebalance their sources of growth, and increase their productivity and efficiency," said Changyong Rhee, ADB's chief economist.

In its latest Asian Development Outlook 2012 Update, ADB projects the region's gross domestic product (GDP) growth will drop to 6.1% in 2012, and 6.7% in 2013, down significantly from 7.2% in 2011.

The deceleration of the region's two giants - the People's Republic of China and India - in tandem with the global slowdown, is tempering earlier optimism.

The report notes that the ongoing sovereign debt crisis in the euro area and looming fiscal cliff in the US could have disastrous spill-overs to the rest of the world, particularly developing Asia.

The projected slowdown is likely to ease price pressures, however, with inflation falling from 5.9% in 2011 to 4.2% for both 2012 and 2013.

The People's Republic of China (PRC) is forecast to grow 7.7% this year and 8.1% in 2013, a dramatic drop from the 9.3% posted in 2011. The slowdown in the PRC is having a knock-on effect elsewhere in East Asia, with diminished demand for intra-regional exports.

Weak demand from industrialised countries is impacting East Asia's exports, and growth in the sub-region are now forecast at 6.5% in 2012, with an uptick to 7.1% in 2013.

For India, GDP growth will slow to 5.6% in 2012, down from 6.5% in 2011, the ADB says. Due in significant part to weak investment demand, this is also expected to slow South Asia's growth to 5.6% and 6.4% for 2012 and 2013, respectively.

Growth in South East Asia is expected to quicken to just over 5% in 2012, mainly due to Thailand's recovery from severe flooding in 2011.

Higher levels of government spending have contributed to growth in Malaysia and the Philippines, while investment and private consumption in the sub-region are generally buoyant with inflationary pressures abating.