Developing Asia GDP growth cut to 4.6% on China slowdown – ADB

SINGAPORE (ICIS)–The Asian Development Bank (ADB) on Thursday cut its GDP growth forecast for developing Asian countries to 4.6% from its previous projection of 5.2%, with China’s growth lowered by a full percentage point to 4.0%.

India’s growth was also projected to slow down, to 7.2% from 7.5% previously, the multilateral institution said in its Asian Development Outlook Supplement report, citing worsening economic conditions.

For 2023, the GDP forecast for developing Asia was lowered to 5.2% from 5.3%, it said.

“With household demand hit by recent COVID-19 outbreaks, adding to the ongoing stress in the property market, the growth forecast for China is revised down by 1 percentage point to 4% in 2022,” the ADB said.

The growth forecast for China next year remains unchanged at 4.8% as carry-over effects from accelerating growth in the second half of this year will likely be dampened by fiscal consolidation efforts next year.

China’s “zero COVID” policy has led to strict curbs to choke outbreaks of the virus, most notably the two-month lockdown at its economic hub Shanghai which ended on 1 June.

The country is facing yet another surge in COVID-19 cases, fueled by Omicron sub-variants, with 826 cases recorded on 20 July, compared with the previous day’s 935 – the highest daily tally since 21 May.

For southeast Asia, the 2022 GDP forecast was raised to 5.0% from 4.9% as domestic demand benefits from the continued lifting of COVID-19 mobility restrictions and the re-opening of borders in some economies in the subregion.

“Risks to the region’s economic outlook remain elevated, and mainly associated with external factors,” the Manila-based institution said.

“A substantial slowdown in global growth could adversely affect exports, manufacturing activity and employment prospects, and cause turbulence in financial markets,” it said.

Even though the impact of COVID-19 has declined across most of developing Asia, the economic fallout from Russia’s invasion of Ukraine on the region has increased.

War-induced supply disruptions and escalating sanctions imposed on Russia have led to global commodity prices spiking and remaining higher than 2021’s already elevated levels.

The inflation forecast for developing Asian countries was revised up to 4.2% from 3.7% for 2022, and to 3.5% from 3.1% for 2023, amid higher fuel and food prices.

Headline inflation is at double-digit levels in most of the Caucasus – the region between the Black Sea and the Caspian Sea – and central Asia; in Mongolia in east Asia; in Pakistan and Sri Lanka in south Asia; and in Laos and Myanmar in southeast Asia.

However, headline and core inflation in the rest of developing Asia’s large economies remain manageable and moderate on average and “much lower than elsewhere in the world”, the ADB added.

Focus article by Nurluqman Suratman

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