MANILA, PHILIPPINES – Developing Asia remains on track toward steady growth in 2014 despite slower-than-expected growth in the United States (US) in the first quarter, says a new Asian Development Bank (ADB) report.
The Asian Development Outlook (ADO) Supplement, released today, maintains ADB’s April forecast of 6.2% growth in 2014 and 6.4% in 2015 for the region’s 45 developing economies.
“Developing Asia as a region continues to perform well,” said ADB Deputy Chief Economist Juzhong Zhuang. “The pace of the growth moderation in the People’s Republic of China (PRC) is in line with our expectations while the stage is set for India to pursue reform that could unlock its growth potential.”
The major industrial economies are anticipated to expand by 1.5% this year, a downward revision from the 1.9% forecast in April’s ADO 2014. Softer US growth has been somewhat offset by Japan’s robust first quarter performance while the euro area has generally met expectations.
In East Asia, quarterly growth in the PRC met ADB expectations with steady consumer demand, targeted government measures to stabilize investment, and a pickup in external demand in the second quarter of 2014. Both retail sales and industrial production have been picking up pace. Overall, the PRC is on track to meet ADO 2014 forecasts of 7.5% growth in 2014 and 7.4% in 2015.
Improving prospects in India have buoyed South Asia’s growth outlook somewhat. The new government—the first to hold a single-party majority in the lower house since 1984—outlined a 10-point plan to revive the Indian economy prioritizing infrastructure and investment reforms, faster resolution of inter-ministerial issues, efficient policy execution, and policy stability. While detail on the structural reforms remains limited, it is expected that greater political certainty will support a pickup in infrastructure investment. ADB maintains its growth forecast at 5.5% for fiscal year (FY) 2014 but upgrades its FY2015 forecast by 0.3 percentage points to 6.3% as anticipated reform bears fruit.
Pakistan’s growth for the fiscal year that ended in June surprised on the high side—4.1% compared to the ADO 2014 forecast of 3.4%—and Nepal’s growth was seeing a strong finish to its fiscal year. Overall, South Asia’s 2014 forecast is nudged up 0.1 percentage points to 5.4%. The improved outlook in India pushes up the subregional forecast for 2015 from 5.8% to 6.1%.
The outlook for Southeast Asia has softened as growth prospects falter in Indonesia, Thailand, and Viet Nam. In Indonesia, first quarter 2014 growth slowed to 5.2% as soft external demand, low commodity prices, and the temporary ban on select mineral exports undermined the recovery of net exports. Thailand’s economy contracted by 0.6% in the first quarter as the political deadlock affected domestic demand and tourism. Viet Nam’s growth forecast has been slightly adjusted to account for the effect of tensions with the PRC on economic activities including recent factory riots. The 2014 forecast for the subregion is downgraded by 0.3 percentage points to 4.7%. As the factors slowing growth in 2014 are expected to be temporary, the forecast growth of 5.4% in 2015 has been maintained.
Growth in Central Asia is gradually moderating, with many economies affected by the deteriorating outlook of the Russian Federation. Revised projections reflect weaker-than-expected performances in Kazakhstan, Kyrgyz Republic, and Uzbekistan so far in 2014. Aggregate growth projections for the region are revised down to 6.3% in 2014 and further to 6.1% in 2015, from 6.5% forecast for both years in ADO 2014.
A devastating tropical storm in Solomon Islands and weaker-than-expected indicators for Palau and Timor-Leste are holding back growth in the Pacific. Overall, Pacific GDP is expected to grow 5.2% in 2014, a 0.2 percentage point decline from the ADO 2014 forecast. The pace of growth is expected to soar to 13.2% in 2015 led by a one-time growth surge in Papua New Guinea from its first full year of liquefied natural gas exports.
The Asian Development Outlook is ADB’s main economic forecasting product. It is published each April with an update published in September and brief supplements published in July and December. All materials are available at www.adb.org/data/publications.