BEIJING, PEOPLE'S REPUBLIC OF CHINA – The Asian Development Bank (ADB) has cut its 2015 growth forecast for Developing Asia to 6.1% from 6.3%, amidst slower-than-expected economic activity in the United States (US) and the People’s Republic of China (PRC), according to a new report.
In a supplement to its Asian Development Outlook (ADO) 2015 published last March, ADB also projected 2016 gross domestic product (GDP) growth for the region to come in at 6.2%, down from 6.3% forecast previously. ADO is ADB’s flagship annual economic publication.
“Slower growth in the PRC is likely to have a noticeable effect on the rest of Asia given its size and its close links with other countries in the region through regional and global value chains,” said ADB Chief Economist Shang-Jin Wei. “While weaker-than-expected external demand, a declining working age population, and rising wages, have contributed to a slower rate of growth in the PRC, reforms aimed at improving labor market flexibility and capital allocation to the most productive firms are needed as they can also help to raise the growth rate.”
Ongoing softness in the major industrialized economies (US, Japan, Euro Area) will see a slowdown in East Asia as a whole, with growth now at 6.2% in 2015, down from 6.5% forecast earlier.
After a slow first half, full-year 2015 growth in the PRC is now estimated at 7.0%, down from 7.2% previously, and will ease further to 6.8% next year. Consumption growth in the country remains robust but investment growth has continued to decelerate. The financial sector is also expected to contribute less to growth after the recent stock market correction, although the drop in stock prices is unlikely to have much impact on consumption, the report said.
In India, growth forecasts remain unchanged at 7.8% in fiscal year (FY)2015 and 8.2% in FY2016, supported by a healthy monsoon and new investments. South Asia as a whole is now expected to grow 7.3% in 2015, up slightly from 7.2% seen earlier, with a better-than-expected economic performance in Bangladesh balancing the earthquake-related slowdown in Nepal. In 2016, growth for the subregion is expected to expand to 7.6%.
Southeast Asia will see slower-than-previously forecast growth of 4.6% for 2015, weighed down by lower-than-expected first half performances in Indonesia, Singapore, and Thailand. In 2016, the subregional economy is projected to expand 5.1%, below 5.3% estimated earlier.
In Central Asia, lower global commodity prices and the recession in the Russian Federation, have dampened economic performance, with growth in 2015 seen unchanged at 3.5%, and the forecast revised down to 4.2% from 4.5% for 2016. Pacific economies, meanwhile, will see a strong year in 2015, with growth of 9.9%, supported by Papua New Guinea’s (PNG) first full year of liquefied natural gas exports. In 2016, growth will fall back to 5.0% as the one-off boom from the PNG gas exports eases.
Ongoing softness in fuel prices and subdued food costs are containing inflationary pressures for now, with the projection for 2015 consumer price rises revised down to 2.4% from 2.6% earlier. Inflation is seen at 3% in 2016, unchanged from the previous forecast.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.