Economies in the Asia and Pacific region are expected to grow by 7.4 percent in 2007, down from 7.9 percent in 2006, due to a less favorable external environment, a UN report said on Wednesday.

The UN Economic and Social Survey of Asia and the Pacific 2007 ascribed the slower growth largely to the slowing U.S. economy and a moderate decline in global electronic demand as well as falling commodity prices.

As the international economic environment weakens, momentum in the region is expected to come from China, India and Japan and a rebound in economic growth in South-East Asian economies will add to the growth momentum of the region, the report said.

Inflation, projected at 3.8 percent, will be less of a problem in 2007 than in 2006, it said.

Managing exchange rates will be the biggest challenge in 2007, with major currencies in the region expected to continue to appreciate, partly because of capital flows to the region and partly due to the imbalances in the United States economy, it warned.

The report also singled out some downside risks to economies in the region, including an oil price shock, an abrupt cooling of housing markets in the United States and an avian flu pandemic.