South Asia to grow 7.3 pct in 2015: ADB

Asian Development Bank

July 29, 2015 (LBO) – South Asia is expected to grow 7.3 percent in 2015, up slightly from 7.2 percent seen earlier, with a better-than-expected economic performance in Bangladesh balancing the earthquake-related slowdown in Nepal, a new ADB report says.

“In 2016, growth for the sub region is expected to expand to 7.6 percent,” a supplement to the Asian Development Outlook (ADO) 2015 published last March 2015 said.

“In India, growth forecasts remain unchanged at 7.8 percent in fiscal year (FY)2015 and 8.2 percent in FY2016, supported by a healthy monsoon and new investments.”

The ADO is ADB’s annual economic publication.

Meanwhile, the ADB has cut its 2015 growth forecast for developing Asia to 6.1 from 6.3 percent, amidst slower-than-expected economic activity in the United States and China, according to a new report.

The ADB also projected 2016 gross domestic product (GDP) growth for the region to come in at 6.2 percent, down from 6.3 percent forecast previously.

ADB Chief Economist Shang-Jin Wei said that slower growth in the China is likely to have a noticeable effect on the rest of Asia given its size and its close ‎links with other countries in the region through regional and global value chains.

“While weaker-than-expected external demand, a declining working age population, ‎and rising wages, have contributed to a slower rate of growth in China, reforms aimed at improving labor market flexibility and capital allocation to the most productive firms are needed as they can also help to raise the growth rate.”

Southeast Asia will see slower-than-previously forecast growth of 4.6 percent for 2015, the report said weighed down by lower-than-expected first half performances in Indonesia, Singapore, and Thailand.

“In 2016, the sub regional economy is projected to expand 5.1 percent, below 5.3 percent estimated earlier.”

In Central Asia, lower global commodity prices and the recession in the Russian Federation, have dampened economic performance, with growth in 2015 seen unchanged at 3.5 percent, and the forecast revised down to 4.2 percent from 4.5 percent for 2016, the report said.

“Pacific economies, meanwhile, will see a strong year in 2015, with growth of 9.9 percent, supported by Papua New Guinea’s (PNG) first full year of liquefied natural gas exports,”

“In 2016, growth will fall back to 5.0 percent as the one-off boom from the PNG gas exports eases.”

Ongoing softness in fuel prices and subdued food costs are containing inflationary pressures for now, with the projection for 2015 consumer price rises revised down to 2.4 percent from 2.6 percent earlier.

Inflation is seen at 3 percent in 2016, unchanged from the previous forecast.

Ongoing softness in the major industrialized economies like US, Japan, Euro Area will see a slowdown in East Asia as a whole, with growth now at 6.2 percent in 2015, down from 6.5 percent forecast earlier, the report said.

“After a slow first half, full-year 2015 growth in China is now estimated at 7.0 percent, down from 7.2 percent previously, and will ease further to 6.8 percent next year,”

“Consumption growth in the country remains robust but investment growth has continued to decelerate,”

“The financial sector is also expected to contribute less to growth after the recent stock market correction, although the drop in stock prices is unlikely to have much impact on consumption.”