13 April, 2018, 12:00 am
HONG KONG, CHINA – Growth picked up across most of the economies in developing Asia, supported by continued high demand for exports and rapidly expanding domestic demand, says a new Asian Development Bank (ADB) report.
In its new Asian Development Outlook (ADO) 2018, ADB forecasts gross domestic product (GDP) growth in Asia and the Pacific to reach 6.0 per cent in 2018 and 5.9 per cent in 2019, a slight deceleration from the 6.1 per cent registered in 2017. Excluding the high-income newly industrialised economies, growth is expected to reach 6.5 per cent in 2018 and 6.4 per cent in 2019, from 6.6 per cent in 2017. ADO is ADB’s flagship annual economic publication.
“Economies across developing Asia will maintain the current growth momentum driven by sound policies, expanding exports, and robust domestic demand,” said Yasuyuki Sawada, ADB’s chief economist.
“Strong regional trade links and rising financial buffers position the region well to withstand potential external shocks, including the risks of rising trade tensions and rapid capital outflows.”
The recovery in industrial economies continues, with the US, euro area, and Japan expected to collectively grow by 2.3 per cent in 2018 before slowing to 2.0 per cent in 2019.
Recently enacted tax cuts will fuel growth in the US as the Federal Reserve keeps inflation in check through gradual monetary tightening.
Meanwhile, rising business confidence and easy monetary policy will support growth in the euro area and Japan.
The service sector is fueling the People’s Republic of China’s (PRC) continued growth, increasing by 8 per cent in 2017. Growth in the PRC will slow to 6.6 per cent in 2018 and 6.4 per cent in 2019, following the rapid 6.9 per cent expansion in 2017.
Strong demand at home and abroad together with economic reforms lay the foundation for continued growth and macroeconomic stability in the PRC.
Growth in South Asia remains among the world’s fastest, driven by a recovery in India, the region’s largest economy. Indian growth is expected to pick up to 7.3 per cent in fiscal year (FY) 2018 and 7.6 per cemt in FY2019, following the estimated 6.6 per cent in FY2017.
The impact of the demonetisation of high-value banknotes has dissipated and the full implementation of the goods and services tax will bolster growth through 2019.
Southeast Asia continues to benefit from the rise in global trade and the pickup in commodity prices. The subregion is expected to maintain its 2017 growth rate of 5.2 per cent in both 2018 and 2019.
Strong investment and domestic consumption will drive acceleration in growth in Indonesia, the Philippines, and Thailand, while an expansion in its industrial base will boost Viet Nam.
Growth in Central Asia is expected to reach 4.0 per cent in 2018 and 4.2 per cent in 2019, on the back of rising commodity prices.
Asian consumers and commodity price rises will fuel higher inflation in the region.
Regional consumer price inflation is projected to accelerate to 2.9 per cent in 2018 and 2019, from the 2.3 per cent registered in 2017. Inflation projections for the next 2 years, however, are well below the 10-year regional average of 3.7 per ceb.
Risks to the outlook are tilted to the downside, driven primarily by fears of escalating trade tensions.
Recent US tariffs on select products have not yet dented trade, but further actions by the US and counteractions against them could undermine business and consumer confidence in Asia and the Pacific. Higher US interest rates could accelerate capital outflows, although this risk is mitigated to some degree by abundant liquidity throughout the region. Fortunately, most Asian economies are well positioned to meet these challenges.