ADB slashes Asia-Pacific growth forecast on weaker China's economy

The Asian Development Bank (ADB) on Tuesday trimmed its economic growth forecast for the Asia-Pacific region amid slower growth in China and tepid demand from major industrial economies.

The region’s gross domestic product was now predicted to expand by 6.3 per cent in 2013, down from its original forecast of 6.6 per cent in April, the Manila-based bank said.

The 2014 growth forecast was cut to 6.4 per cent from 6.7 per cent, the bank said in an update of its annual Asian Development Outlook report in April.

“Developing Asia had difficulty building momentum in the first half of 2013, despite the marginally better outlook for the advanced economies,” the update said.

Weak growth in China

Slower growth in China is a key factor weighing down on the outlook for developing Asia, according to the report that covers 45 countries in the Asia-Pacific region.

Asia’s largest economy is expected to expand by only 7.7 per cent in 2013 and 7.5 per cent in 2014, from earlier forecast of 7.8 per cent and 8.2 per cent respectively.

The weaker Chinese economy was expected to stymie economic growth in East Asia, which was projected to reach only 6.7 per cent in 2013 and 2014 from the initial forecast of 7.1 per cent.

The ADB added that “unexpectedly subdued economic activity” across sub-regions was also a challenge for the Asia-Pacific economies as exports and imports slackened on weak external demand.

In India, slow progress in pushing through reforms needed to ease business bottlenecks prompted the ADB to cut growth forecast to 5.8 per cent in 2013, slower than the previous prediction of 6 per cent.

The bank kept its forecast of 6.5 per cent growth in 2014 for India.

In South-East Asia, growth was expected to be 5.2 per cent in 2013 and 5.6 per cent in 2014 compared to the initial forecast of 5.4 per cent and 5.7 per cent respectively.

Economies in the Pacific were expected to expand 5 per cent in 2013, down from the previous prediction of 5.2 per cent, while growth in 2014 was still expected to be 5.5 per cent.

The slower growth in the region is helping contain inflation pressures, which the bank had warned about in April.

“The growth slowdown in developing Asia and other emerging markets, along with the continued softness in the major industrial economies, is suppressing demand for energy, while strong harvests are keeping food prices in check,” the report.

Inflation in developing Asia was not expected to rise 3.5 per cent in 2013 and 3.7 per cent in 2014, from the previous projection of 4 per cent and 4.2 per cent respectively.

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