The Asian Development Bank has lowered its growth forecasts for the region, citing the war in Ukraine, raising interest rates to combat decades-high inflation and China’s slowing economy.
The Manila, Philippines-based credit agency revised its estimate for growth in developing Asian economies to 4.3 percent, down from an earlier forecast of 5.2 percent. Growth in 2023 slowed to 4.9 percent from 5.3 percent in the revised regional outlook released on Wednesday.
ADB economists said that for the first time in three decades, other developing Asian economies would grow faster than China’s.
The updated outlook forecasts the world’s second-largest economy to expand at an annual rate of 3.3 percent this year, down from 8.1 percent in 2021 and well below the ADB’s April estimate of a 5.0 percent expansion. The setback represents a prolonged slowdown in China’s growth coupled with disruptions from COVID-19 outbreaks and lockdowns and other measures to combat the virus.
India and Maldives are forecast to see the fastest expansions, at 7 percent and 8.2 percent, respectively. In Sri Lanka, where a financial crisis has left the country unable to pay its debts and afford imports, the economy is forecast to contract 8.8 percent, below the 3.3 percent growth rate for the year. past.
The ADB’s forecast for inflation in Asia remains less severe than in the United States and some other economies, at 4.5 percent in 2022 and 4.0 percent next year. But the report puts inflation in Sri Lanka at nearly 45 percent this year, while prices are forecast to rise 16 percent in Myanmar and almost 15 percent in Mongolia.
Inflation has also risen sharply in Laos and Pakistan, two other countries whose economies are in jeopardy from rising debt burdens and weaker growth.
Rising grain and oil and gas costs have been the main factors behind the price increases, the report showed, noting: “While global food and energy prices have fallen recently, it will take long as these decreases translate into lower domestic prices. ”
Most Southeast Asian economies are expected to maintain a solid pace of growth as they reopen to tourism and demand recovers. Domestic consumer spending, investment and remittances from overseas workers are also driving stronger business activity, according to the report.
But the demand driving growth remains relatively weak: while exports across the region rose 15 percent from a year earlier in the first half of the year, most of it reflected higher prices, with real prices rising. export volumes of only 5.2 percent. Exports fell in July and August.
Meanwhile, the pandemic boom in demand for electronics and their components, as people adapted to remote work and education, has subsided, also slowing export growth.
The silver lining to that moderation in demand was that supply delays and shortages have lessened and shipping costs have dropped dramatically. At the end of August, it cost $7,000 to ship a container from East Asia to the US, up from $16,000 in January.
The report noted that coronavirus vaccination rates across the region, with 73 percent fully vaccinated as of the end of August, were similar to those in the European Union, with only a handful of countries with near-universal coverage.
More outbreaks remain a risk for the region, he said. So too are developments in Ukraine as governments impose sanctions against Moscow, such as the EU’s decision to ban seaborne imports of Russian oil by the end of the year.