MANILA, PHILIPPINES - Continued tepid demand from the major industrial economies coupled with slower growth in the People's Republic of China (PRC) are weighing on the outlook for developing Asia, says a new Asian Development Bank (ADB) report.
The latest Asian Development Outlook Supplement released today trimmed the 2013 growth forecast for the 45 developing member countries of ADB to 6.3% and cut its 2014 forecast to 6.4%. In April, ADB had predicted the region to grow 6.6% this year and 6.7% next year.
"The drop in trade and scaling back of investment are part of a more balanced growth path for PRC, and the knock-on effect of its slower pace is definitely a concern for the region. But we are also seeing more subdued activity across much of developing Asia," said ADB Chief Economist Changyong Rhee.
The PRC - home to developing Asia's largest economy - is likely to see its economy expand 7.7% this year and 7.5% in 2014 after growth of 7.8% in 2012. The report notes that import and export growth has slowed given weak external demand, but notes continuing robust consumer confidence. Slower growth in the PRC has subdued the outlook for the entire East Asia region, as well as, to a lesser extent, for Southeast Asia, where the Philippines and other large ASEAN countries are otherwise seeing solid growth.
In India, meanwhile, slow progress in pushing through the reforms needed to ease business bottlenecks means growth is likely to be 5.8% this year, slower than the previously forecast 6.0%. ADB maintains its 2014 forecast of 6.5% for 2014. Elsewhere in South Asia, Sri Lanka continues to grow strongly while other parts of the region will see softer than anticipated growth.
The report has also trimmed forecasts for Central Asia, reflecting the sluggish economic performance of Kazakhstan and Georgia, and for the Pacific where Timor-Leste is seeing a slowdown in government spending.
Inflation pressures, meanwhile, are waning on the back of declining energy and food prices, given slower global demand for fuels and bumper grain harvests.