Asian Development Outlook 2018 Supplement: The Outlook Firms as Trade Conflict Pauses

Despite challenges brought about by trade conflict, growth forecasts for developing Asia remain unchanged at 6.0% for 2018 and 5.8% for 2019, as envisaged in September in Asian Development Outlook (ADO) 2018 Update. East Asia and the Pacific are on track to meet growth projections. Unexpectedly strong expansion in Central Asia offsets small downward revisions for South and Southeast Asia in 2019. Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, the regional growth outlook is maintained at 6.5% for 2018 and 6.3% for 2019.

The collective growth projections for the major industrial economies of the United States (US), the euro area, and Japan are retained from the Update. Favorable outcomes in the US and the euro area confirm that the major industrial economies will realize growth forecasts in the Update at 2.3% for 2018 and 2.1% for 2019, though an unexpected contraction in Japan in the third quarter warrants a slight downgrade to its 2018 growth projection.

Highlights

• Backed by robust domestic demand, developing Asia continues to weather external headwinds. This Supplement maintains growth projections at 6.0% for 2018 and 5.8% for 2019, as detailed in the ADO 2018 Update in September. Excluding the newly industrialized economies, regional growth is forecast at 6.5% in 2018 and 6.3% in 2019, as envisaged in September.
• East Asia growth projections are maintained at 6.0% for 2018 and 5.7% for 2019 despite lower forecasts for the newly industrialized economies. Growth in the People's Republic of China is still expected at 6.6% in 2018, moderating to 6.3% in 2019.
• India is maintaining growth momentum on rebounding exports and higher industrial and agricultural output. South Asia is largely on track to meet growth projections, still 7.0% for 2018 but revised down marginally to 7.1% for 2019.
• The Southeast Asia growth forecast is retained at 5.1% for 2018, assuming robust consumption and infrastructure investment. Adjustments for Indonesia, Malaysia, and Thailand lower the 2019 outlook by 0.1 percentage points to 5.1%.
• Realized and prospective performances in a number of large Central Asian economies prompt an upward revision to the growth forecast to 4.2% for 2018 and 4.3% for 2019. Projections for the Pacific are largely unchanged.
• Softer international commodity prices and domestic factors have kept consumer prices in check regionally, prompting downward revisions to inflation forecasts from 2.8% to 2.6% for 2018 and from 2.8% to 2.7% for 2019.
• A truce between the People's Republic of China and the US provides temporary respite from new tariffs, but the unresolved trade conflict remains the foremost downside risk to forecasts.