Trade war, Brexit could slow developing Asia's 2019, 2020 growth: ADB


Reuters | Published: April 03, 2019 10:40:03 | Updated: April 06, 2019 14:48:38


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Growth in developing Asia could slow for a second straight year in 2019 and lose further momentum in 2020, the Asian Development Bank (ADB) said on Wednesday, warning of rising economic risks from a bitter Sino-US trade war and a potentially disorderly Brexit.

Developing Asia, which groups 45 countries in the Asia-Pacific region, is expected to grow 5.7 this year, the ADB said in its Asian Development Outlook report, slowing from a projected 5.9 per cent expansion in 2018 and 6.2 per cent growth in 2017.

The 2019 forecast represents a slight downgrade from its December forecast of 5.8 per cent. For 2020, the region is forecast to grow 5.6 per cent, which would be the slowest since 2001.

“A drawn out or deteriorating trade conflict between the People’s Republic of China and the United States could undermine investment and growth in developing Asia”, Yasuyuki Sawada, ADB’s chief economist, said in a statement.

The lender also cited uncertainties stemming from US fiscal policy and a possible disorderly Brexit as risks to its outlook because they could slow growth in advanced economies and cloud the outlook for the world’s second largest economy.

“Though abrupt increases in US interest rates appear to have ceased for the time being, policy makers must remain vigilant in these uncertain times,” Sawada said.

China’s economy will probably grow 6.3 per cent this year, the ADB said, unchanged from its December projection, but slower than the country’s 6.6 per cent expansion in 2018. Growth in the Chinese mainland is projected to cool further to 6.1 per cent in 2020.

China has set its 2019 economic growth target at 6.0 to 6.5 per cent.

By region, South Asia will remain the fastest growing in Asia Pacific, with the ADB predicting an expansion of 6.8 per cent this year - lower than its previous forecast of 7.1 per cent - and 6.9 per cent next year.

From an estimated 7.0 per cent growth in 2018, India’s economy is projected to expand at a faster pace of 7.2 per cent in 2019 and 7.3 per cent in 2020, the ADB said, as lower policy rates and income support to farmers boost domestic demand.

This year’s growth forecast for Southeast Asia was trimmed to 4.9 per cent from an earlier estimate of 5.1 per cent, as the Manila-based lender expect Malaysia, Singapore, Philippines and Thailand to grow slower than previously thought. Next year, Southeast Asia is predicted to grow 5.0 per cent.

Citing stable commodity prices, the ADB lowered its average inflation forecast for developing Asia to 2.5 per cent this year from 2.7 per cent previously, and it is expected to remain subdued at 2.5 per cent in 2020.

 

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