Asian Development Outlook 2018 Supplement: The Outlook Remains Stable

Developing Asia is largely on track to meet growth expectations as set out in April in Asian Development Outlook 2018 (ADO 2018). The regional gross domestic product (GDP) is forecast to expand by 6.0% in 2018 and 5.9% in 2019, the rate envisaged in April, with subregional forecasts upgraded for Central Asia. Regional growth forecasts are maintained at 6.5% for 2018 and 6.4% for 2019 when excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China.

The combined growth forecast for the major industrial economies—the United States (US), the euro area, and Japan—is retained from ADO 2018 as growth in the US and the euro area remains robust. In Japan, though, unanticipated contraction in the first quarter (Q1) prompts a slight revision of the 2018 growth.

Highlights

• Healthy domestic demand reinforces regional prospects detailed in Asian Development Outlook 2018. This Supplement maintains growth projections at 6.0% for 2018 and 5.9% for 2019, despite global rumblings. Excluding newly industrialized economies, regional growth is forecast at 6.5% in 2018 and 6.4% in 2019, as envisaged in April.
• East Asian growth is on track to meet April forecasts of 6.0% in 2018 and 5.8% in 2019. The People’s Republic of China is still expected to grow by 6.6% in 2018 before moderating to 6.4% in 2019.
• South Asia remains the fastest expanding subregion, with growth projected at 7.0% in 2018 and 7.2% in 2019. India is expected to achieve April forecasts of 7.3% in 2018 and 7.6% in 2019 as bank-strengthening bolsters private investment and benefits kick in from a new goods and services tax.
• Southeast Asia continues to be buoyed by robust domestic demand, particularly for private consumption and investment. It is on track to meet forecasts of 5.2% growth this year and next.
• Central Asia has performed better than expected, prompting growth projection upgrades to 4.2% for 2018 and 4.3% for 2019. The Pacific will likely realize earlier forecasts.
• Despite rising commodity prices, domestic factors have kept consumer price pressures in check regionally, prompting downward revision to inflation forecasts from 2.9% to 2.8% for both years. As US monetary policy normalizes, central banks in the region act to spare their currencies’ sharp depreciation and to subdue inflation.
• Trade tariffs implemented so far in 2018 have not significantly dented buoyant flows, but ongoing friction remains a downside risk to the outlook for developing Asia.