Asian Development Bank cuts forecasts to reflect weakening outlook – The Diplomat

The Asian Development Bank downsized its growth forecast for the region, citing the war in Ukraine, rising interest rates to fight decades-old high inflation and a slowing Chinese economy.

The Manila, Philippines-based lending agency revised its growth estimate in Asian developing economies to 4.3%, down from a previous forecast of 5.2%. Growth in 2023 was reduced to 4.9% from 5.3% in the revised regional outlook released Wednesday.

ADB economists said that for the first time in three decades, other Asian developing economies would grow faster than China’s.

The updated outlook predicts that the world’s second largest economy will expand at an annual rate of 3.3% this year, down from 8.1% in 2021 and far below ADB’s April estimate of one. expansion of 5.0%. The setback represents a long-standing slowdown in China’s growth along with disruptions due to the COVID-19 outbreaks and lockdowns and other measures to fight the virus.

India and the Maldives are expected to see the fastest expansions at 7% and 8.2% respectively. In Sri Lanka, where a financial crisis has prevented the country from paying its debts and affording imports, the economy is projected to contract by 8.8 percent, down from the 3.3 percent growth rate. percent last year.

Do you like this article? Click here to sign up for full access. Only $ 5 per month.

The ADB forecast for inflation in Asia remains less severe than in the US and some other economies, at 4.5% in 2022 and 4.0% next year. But the report put inflation in Sri Lanka at nearly 45% this year, while prices are expected to rise by 16% in Myanmar and nearly 15% in Mongolia.

Inflation also rose sharply in Laos and Pakistan, two other countries with economies threatened by rising debt and weaker growth.

Rising costs for wheat and oil and gas were the main factors behind the price hike, the report showed, noting: “Although global food and energy prices have fallen recently, there it will take some time for these drops to translate into lower domestic prices. “

Most of the Southeast Asian economies are expected to maintain a robust pace of growth as they reopen to tourism and demand picks up. Domestic consumer spending, investment and remittances from foreign workers are also driving stronger business, the report said.

But the demand driving growth remains relatively weak: While exports across the region increased 15% from a year earlier in the first half of the year, most reflect higher prices, with real export volumes in only 5.2% increase. Exports fell in July and August.

Meanwhile, the boom in demand for electronic products and their components, as people adapted to remote work and school, has subsided, slowing export growth as well.

The upside to that moderation in demand has been that delays and shortages in supply have decreased and shipping costs have dropped dramatically. By the end of August, shipping a container from East Asia to the United States cost $ 7,000, down from $ 16,000 in January.

The report found coronavirus vaccination rates across the region, at 73 percent fully vaccinated at the end of August, were similar to those in the European Union, with only a handful of countries having near-universal coverage.

Further outbreaks remain a risk to the region, he said. So do developments in Ukraine as governments impose sanctions against Moscow, such as the EU’s decision to ban maritime imports of Russian oil by the end of the year.