Tuesday, April 1, 2014

ADB predicts steady growth for developing Asia this year

The Asian Development Bank predicted Tuesday developing Asia will continue steady economic growth this year, projecting regional growth to edge up from 6.1 percent in 2013 to 6.2 percent in 2014 and 6.4 percent in 2015.

"Risks to the outlook have eased and are manageable," says the Asian Development Outlook 2014, adding moderating growth in China as its economy adjusts to more balanced growth "will offset to some extent the stronger demand expected from the industrial countries as their economies recover."

ADB President Takehiko Nakao said, "Developing Asia is successfully navigating a challenging global economic landscape and is well positioned to grow steadily over the next two years."

"Risks to the outlook have eased compared to the recent past, and policymakers in the region can manage them. At the same time, countries should continue to make every effort to pursue sound macroeconomic policies and needed structural reforms," Nakao added.

The annual ADB report says the regional growth outlook depends on continued recovery in the major industrial economies and on China managing to contain internal credit growth smoothly.

"Two broad trends shape the outlook," the report says.

"Combined gross domestic product growth in the United States, the euro area and Japan is expected to pick up to 1.9 percent in 2014 from 1.0 percent in 2013 before strengthening further to 2.2 percent in 2015," it says.

"The improvement in demand will be offset somewhat by moderating growth in China where the economy slowed to 7.7 percent in 2013 on impact from tightened credit growth, pared industrial overcapacity, deepening local government debt, rising wages, currency appreciation and the continuing shift in the government's development priorities away from quantity toward quality.

"These factors persist and China growth is forecast to slow to 7.5 percent in 2014 and 7.4 percent in 2015," the report says.

While risks to the outlook have eased, the report stresses the need to monitor three areas.

"First, if efforts in China to curb credit expansion are too abrupt and excessively undermine growth, a deeper slowdown could drag down prospects for its trade partners. Second, data on the recovery in the major industrial economies have been mixed, pointing to the possibility that demand for the region's goods from these countries may be softer than envisaged. And third, a further shock to global financial markets from changes in U.S. monetary policy cannot be ruled out," it says.

And growth in East Asia will flatten as growth moderates in China.

"East Asia grew by 6.7 percent in 2013, a slight uptick from 2012, and is expected to maintain that rate into 2014 and 2105. The slower growth in China will offset upswings in the newly industrialized economies of South Korea, Hong Kong and Taiwan," it says.

As policies tighten to curb inflation, it says growth in Mongolia will moderate in 2014 and remain "broadly stable" in 2015.

"Inflation in East Asia hit a four-year low of 2.4 percent in 2013 and will remain manageable at 2.5 percent in 2014 and 2.9 percent in 2015," it says.

Although growth in South Asia is edging up, the report says it remained the slowest growing subregion, with GDP expanding by 4.8 percent in 2013.

"Moderation in India had an outsized impact on the subregional average. Growth is forecast to improve to 5.3 percent in 2014 and 5.8 percent in 2015, with projected recovery in India to 5.5 percent and 6.0 percent, assuming the implementation of long-delayed structural reforms."

Growth patterns in Southeast Asia will be dominated by country factors.

"Labor tensions in Cambodia and political unrest in Thailand are restraining growth in these neighbors," the report says.

"Subregional GDP decelerated to 5 percent in 2013 as soft export markets and slowdowns affected Indonesia, Thailand and Malaysia. Growth in Indonesia, the biggest of these economies, was dampened by policies the government adopted to subdue inflation after it sharply raised fuel prices," the report notes

Subregional growth is forecast to be similar in 2014 as gains from better export markets are offset by moderating domestic demand. The outlook improves to 5.4 percent in 2015, with growth picking up in Indonesia after inflation ebbs and Thailand's economy rebounding if political disruption recedes.


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