Trade lifts ADB’s growth forecast for developing Asia

• South Asia remains fastest-growing sub-region despite downgrade from 6.7% to 6.5%
• India revised down to 6.7% from 7%, Sri Lanka remains unchanged at 4.5%
• Developing Asia shows need to maintain open trade: ADB 
• Southeast Asia upgraded to 6.2% from 6%, developed countries to grow at 2.2% from 2%   

The Asian Development Bank (ADB), in its latest report, kept its forecast on Sri Lanka’s growth unchanged at 4.5% for 2017 but upgraded its regional outlook by 0.1% on stronger than expected exports and domestic consumption fueling growth, predicting growth to hit 6.5% this year.

In a supplement to its Asian Development Outlook Update 2017 report, ADB upgraded its 2017 growth domestic product (GDP) outlook in the region compared to its September 2017 forecast, while its 2018 forecast remains unchanged at 5.8%. An unexpectedly strong expansion in Central, East and Southeast Asia has offset a downward adjustment in South Asia, it said.  

South Asia will remain the fastest-growing of all sub-regions in Asia and the Pacific, despite a downward revision from previous projections from 6.7% to 6.5% in 2017, and is expected to pick up to 7% in 2018. 

GDP growth in India—the sub-region’s largest economy—was revised down to 6.7% in 2017 and 7.3% in 2018. Although the strong manufacturing expansion helped the economy reverse five consecutive quarters of deceleration in the second quarter of fiscal year 2017, the recovery is more subdued than assumed earlier due to rising crude oil prices, soft private investment growth and weather-related risks to agriculture. 

“Developing Asia’s growth momentum, supported by recovering exports, demonstrates that openness to trade remains an essential component of inclusive economic development,” said ADB’s Chief Economist Yasuyuki Sawada. 

“Countries can further take advantage of the global recovery by investing in human capital and physical infrastructure that will help sustain growth over the long term.”

Combined growth for the major industrial economies is revised upward to 2.2% for 2017 and 2% for 2018 due to robust domestic demand in the euro area, and in Japan due to private investment and net exports. Growth projections for the United States remain unchanged at 2.2% in 2017 and 2.4% in 2018.

By sub-region, growth for East Asia is revised upward to 6.2% in 2017 from 6%, while 2018 projections of 5.8% are unchanged. Growth prospects in China - the world’s second largest economy - are revised up on resilient consumption. Growth in the PRC is now expected to expand by 6.8% in 2017 and 6.4% in 2018.

Growth for Southeast Asia is picking up faster than earlier forecast with GDP set to expand by 5.2% in 2017 and 2018, compared to September 2017 forecasts of 5% and 5.1%. The sub-region is benefiting from stronger investments and exports, with accelerating growth for Brunei Darussalam, Malaysia, the Philippines, Singapore and Thailand. Infrastructure investment continued to play an important role in Indonesia, the Philippines and Thailand. Robust domestic demand—particularly private consumption and investment—will continue to support growth in the sub-region, according to the report.

The outlook for Central Asia this year has further improved as stronger domestic demand and exports in some countries have fueled recovery in the sub-region. Growth is expected to reach 3.6% in 2017 compared to the 3.3% originally projected. The 2018 forecasts for Central Asia are unchanged at 3.9%.

Growth in the Pacific is expected to remain at 2.9% in 2017 and 3.2% in 2018 with Papua New Guinea—the sub-region’s largest economy—continuing its gradual recovery due to the rebounding mining and agriculture industries. Post-disaster reconstruction and tourism are expected to drive growth further in the sub-region, particularly in Fiji and Vanuatu.

Meanwhile, rising commodity prices have not yet driven inflation across the region, with consumer price inflation tame and stable. Price inflation is unchanged from previous projections of 2.4% in 2017 and 2.9% in 2018.