“The combination of a moderating prospect in China and India, together with delayed recovery of advanced countries, weighed on our forecast for the region as a whole”, said ADB chief economist Shang-Jin Wei, who presented the report at the Foreign Correspondents’ Club in Hong Kong today.
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The bank predicted that the inflation forecast for 2015 has been adjusted to 1.3 percent thanks to a decline in transportation and fuel costs following a sharp fall in oil prices.
Growth in China is seen cooling to 6.8% this year from 7.3% in 2014, and slow further to 6.7% in 2016. The region, which groups 45 countries in Asia-Pacific, grew 6.2 per cent in 2014.
Monetary policy authorities in developing Asia will need to find a balance between stabilising the financial sector and stimulating domestic demand to counter the impacts of a rise in the U.S. interest rate, it said.
The outlook is more sanguine than many might expect but the bank does note their are risks on the horizon with the principle domestic risk “is the current stock market correction possibly affecting consumption, investment, and financial stability”. Vietnam’s exports from January to August rose 9 per cent compared with the same period previous year , government data show.
Reason for the revision is economic recovery in developed countries are slower than expected.
India’s growth is seen weaker at 7.4% and 7.8% for this year and next compared with its July forecasts of 7.8% and 8.2%.
The bank also marked down its 2015 economic outlook for China from seven percent to six-point-eight percent, citing sluggish investment and exports.
The garment industry faces increased competition from the appreciation of the USA dollar, and from low-wage competitors including Myanmar, it said, adding that growth of tourist arrivals softened to 4.6 percent in the first half from 5.2 percent a year earlier. It is also below China’s official target for the year of “about” 7 percent.
Southeast Asia’s growth will be at 4.4 percent this year, same as last year and down from its July forecast of 4.6 percent, before accelerating to 4.9 percent next year, the ADB said.
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China is set to grow at its slowest pace in a quarter century this year even after five central bank interest-rate cuts and fiscal stimulus.
