Apr 07, 2017 (LBO) – Growth is picking up in two-thirds of economies in developing Asia, supported by higher external demand, rebounding global commodity prices, and domestic reforms, making the region the largest single contributor to global growth at 60 percent, says a new Asian Development Bank (ADB) report.
In its new Asian Development Outlook (ADO) 2017, ADB forecasts gross domestic product (GDP) growth in Asia and the Pacific to reach 5.7 percent in 2017 and 2018, a slight deceleration from the 5.8 percent registered in 2016.
ADO is ADB’s flagship annual economic publication.
“Developing Asia continues to drive the global economy even as the region adjusts to a more consumption-driven economy in the People’s Republic of China (PRC) and looming global risks,” said Yasuyuki Sawada, ADB’s Chief Economist.
“While uncertain policy changes in advanced economies do pose a risk to the outlook, we feel that most economies are well positioned to weather potential short-term shocks.”
Industrial economies are gathering growth momentum, with the US, euro area, and Japan expected to collectively grow by 1.9 percent in 2017 and 2018.
Rising consumer and business confidence and a declining unemployment rate have fueled US growth, but uncertainty over future economic policies may test confidence. The euro area continues to strengthen, but its outlook is somewhat clouded by uncertainties such as Brexit.
Meanwhile, Japan remains dependent on its ability to maintain export growth to continue its expansion.
South Asia remains the fastest growing of all sub regions, with growth reaching 7 percent in 2017 and 7.2 percent in 2018.
According to the report in India, the sub region’s largest economy, growth is expected to pick up to 7.4 percent in fiscal year (FY) 2017 and 7.6 percent in FY2018, following the 7.1 percent registered last FY.
“The impact of the demonetization of high-value banknotes is dissipating as the replacement banknotes enter circulation,” it said.
“Stronger consumption and fiscal reforms are also expected to improve business confidence and investment prospects in the country.”
Elsewhere, growth will be lifted by spending on earthquake reconstruction in Nepal, hydropower investment and output in Bhutan, and economic corridor investment from the PRC in Pakistan.
Inflation in South Asia has trended lower in recent years, easing to 4.6 percent in 2016 as buyers benefited from low prices for oil and other commodities.
With these prices turning upward over the forecast period, inflation in South Asia is projected to revive to 5.2 percent in 2017 and 5.4 percent in 2018.
Overall growth in Southeast Asia is forecast to accelerate further with nearly all economies in the region showing an upward trend.
The region will grow 4.8 percent in 2017 and 5 percent in 2018, from the 4.7 percent recorded last year.
Commodity producers such as Malaysia, Viet Nam, and Indonesia will be boosted by the recovery of global food and fuel prices, the new report added.