Asian Development Outlook Supplement: Asia's Economies Steady Despite Global Uncertainty
Developing Asia’s growth outlook continues to be stable despite a slight downgrade to the 2016 forecast in the recent Asian Development Outlook 2016 Update.
The region is now expected to grow this year by 5.6%, or 0.1 percentage point off the rate envisaged in Asian Development Outlook 2016 Update as slower growth is now expected in India, one of the region’s largest economies. Growth is expected to edge back up to 5.7% in 2017, the pace envisaged in the Update. By subregion, growth forecasts are revised slightly down for South Asia in 2016 and the Pacific in 2017 but otherwise unchanged.
The combined growth forecast for the major industrial economies— the United States, the euro area, and Japan—is revised up from Update projections as third-quarter outcomes in the US and euro area proved to be stronger than expected. Robust consumer spending growth supported the US economy, while supportive monetary policy and improving labor markets fueled growth in the euro area. Despite a stronger yen, the external sector still led the expansion in Japan.
- The outlook for developing Asia remains broadly as forecast in Asian Development Outlook 2016 Update. Despite an extraordinary and temporary growth dip affecting one of the region’s largest economies, this Supplement expects the region as a whole to expand by 5.6% in 2016, only 0.1 percentage points less than earlier forecast, and by 5.7% in 2017, as forecast.
- The People’s Republic of China is on course to meet growth expectations of 6.6% in 2016 and 6.4% in 2017. East Asia as a whole is seen to expand by 5.8% this year and 5.6% in 2017 as growth stabilizes in the subregion in line with earlier forecasts.
- India’s surprise demonetization of large banknotes will likely dampen growth this year, but South Asia remains the region’s fastest-growing subregion. It is now expected to grow in 2016 by 6.6%, or 0.3 percentage points less than previously forecast, and in 2017 by 7.3%, as in the Update.
- Growth in the major Southeast Asian economies in the third quarter met projections and even surpassed them in Malaysia and the Philippines. In aggregate, the subregion is still forecast to expand by 4.5% in 2016, picking up to 4.6% in 2017.
- The continued rise in commodity prices has not sufficed to offset fiscal drag in the oil-producing economies of Central Asia. Forecasts in the Pacific are largely unchanged from the Update, though cyclone damage in Fiji is seen to be having a bigger impact on its economy than earlier envisaged.
- Although oil price prospects brightened with the agreement of major oil producers to cut production beginning in 2017, inflation remains subdued. This Supplement retains the Update inflation forecasts for the region at 2.6% in 2016 and 2.9% in 2017.