Chief Economist Shang-Jin Wei discusses the macroeconomic highlights of ADB's Asian Development Outlook 2015 Update.
Title: ADB's Chief Economist on the Asian Development Outlook 2015 Update
Description: Chief Economist Shang-Jin Wei discusses the macroeconomic highlights of ADB's Asian Development Outlook 2015 Update.
Asian Development Bank
Q: What is the updated macroeconomic outlook for developing Asia as a whole?
A: We are projecting a growth rate of 5.8% for this year and 6.0% for next year.
Q: What’s ADB’s updated economic forecast for the People’s Republic of China and India?
A: For PRC, we are seeing a growth rate of 6.8% for this year and 6.7% next year. This reduction in growth rate relative on the past partly had to do with structural fundamental factors such as shrinking working age population and rising wage costs but also partly had to do with relatively weak global economy.
For India, we are seeing a growth rate of 7.4% for this year. This is a very high growth rate for India and for any country. Nonetheless, it is somewhat the growth rate what we saw back in March partly due to a combination of a weak global economy and some of the reforms that need to be implemented are not rolling out as fast as we expected.
Q: What about the rest of the region, what are the main developments?
A: Because the PRC and India are both large and growing fast, taking them out will give us somewhat lower growth rate for the rest of Asia. For example for Southeast Asia, we are seeing a growth rate of 4.4% for this year. For Central and West Asia, we are seeing a growth rate of 3.3% this year. Many countries in Central and West Asia are commodity exporters and the price of their main exports are affected inevitably by global commodity price decline. For Pacific region we are seeing a growth rate in excess of 6%, that’s a very high number because the Pacific region is a relatively small part of overall Asia’s GDP. Their growth rate doesn't contribute as much to the region’s growth rate.
Q: What are the main risks to the outlook?
A: Three main risks specially worth noting:
- If PRC and India, are growing even less fast than what we are currently seeing, the entire region’s outlook will be affected.
- With uncertainty about global interest rate, many countries are worried about reversal of capital flows and this is specially a problem for countries that rely relatively more on foreign financing for their development.
- And finally, the interest rate uncertainty also leads to concern about further round of currency depreciation. Currency depreciation is a problem for those countries whose corporate sector have accumulated a large amount of foreign currency debt.
Q: How is the inflation likely to fluctuate in the region over the next two years?
A: We are seeing a lower inflation for this year at 2.3% compared to last year’s 3% partly because global commodity prices have become lower but we are seeing a recovery in inflation back to about 3% for next year because we are seeing a recovery in global commodity prices due to likely recovery of advanced countries’ economy and many emerging markets will also grow better next year than this year.