Strong consumption and external demand have led to robust growth in many of the countries in the area, especially China, and this should see emerging East Asia expand 8.1 percent this year and 7.9 percent in 2008.

At the same time, soaring capital inflows, which hit a record 269 billion dollars in 2006, make for increasing pressure on currency appreciation and fast-rising asset prices, the ADB said in a semi-annual report on East Asia.

"Authorities in the region are faced with serious challenge as they look for the right policy choices to manage these capital flows and keep the economic expansion on a steady course," said Jong-Wha Lee, head of ADB's office of regional economic integration.

Lee also cautioned on the potential risks for greater-than-expected inflation, especially in Korea, Singapore and China, which reported prices rising at a two-year high of 4.4 percent for June.