Hans Timmer, manager of the World Bank's global trends and development prospects group, told Reuters that Asia was on a solid recovery path following a dip in the first half of the year and that growth in 2006 would stay strong.

"In Asia, the developing countries are growing twice as fast as high income countries," Timmer said ahead of a seminar in Singapore on economic prospects for 2006. "They are growing significantly faster than in the past," he said.

But Timmer said Asia's terms of trade have fallen about one percent in the last year and could fall further if average oil prices rise as expected next year.

"You can see it reflected in how much the countries can consume. We are seeing reserves deteriorating fast," Timmer said. "This is a major risk for developing countries that have done very well in recent years."

The World Bank expects East Asia to maintain 6.2 percent growth next year, unchanged from its growth forecast for 2005, even though it expects higher average oil prices of $56 a barrel.

Timmer said he welcomed the recent interest rate hikes in Asia and expected central banks would continue on a tightening path so long as inflation continued to rise, though so far it was surprisingly modest.

"The cyclical tensions were probably the biggest in Asia. The capacity constraints were most true for the region and we were seeing signs of overheating in some economies," he said.

Timmer added that, China's strong export-led growth would be unsustainable next year, and would likely cool down to below nine percent in 2006 as forecast by the World Bank in November.

On the current US trade deficit, Timmer said the imbalance could not be linked to the value of any currency.

"This is primarily a US story. It is not related to a major misalignment in currencies. It is more related to savings and investment behaviour in the United States," he said.

"The only way to reduce the deficit is to raise the savings rate."