The Asian Development Bank (ADB) yesterday downgraded its economic outlook for Southeast Asia this year, citing political tensions in Thailand and Vietnam and soft external demand in Indonesia.
The Manila-based lender said in a supplement to its economic outlook for the region that it expected GDP to grow 4.7 percent for the year, compared with its April projection of 5 percent.
The bank warned Indonesia, the region’s biggest economy, faces a long period of uncertainty following last week’s disputed presidential election, compounding problems as growth sits at four-year lows and foreign investment shrinks.
In Thailand, the economy contracted 0.6 percent in the first three months of the year, as “political deadlock” hit domestic demand and the crucial tourism industry, and it warned of further shrinkage in the second quarter.
The economy was wracked by nearly seven months of protests that saw 28 people killed and paralyzed the government of former Thai prime minister Yingluck Shinawatra.
However, the bank said with the military coup in May consumer confidence had improved and there was a “tentative sign that a modest recovery may take hold in the second half of the year.”
The bank also said adjustments were made to Vietnam’s economic forecast due to the economic effect of tensions with China.
Relations between Hanoi and Beijing plummeted when, in May, a Chinese oil rig was moved near the disputed Paracel Islands (Xisha Islands (西沙群島) in the South China Sea, which are claimed by both countries and Taiwan.
“Recent data suggest that Southeast Asia has softened... as growth prospects faltered,” the ADB supplement said, adding that it predicts growth of 5.4 percent for next year.
Its estimate for the GDP for developing Asia, which covers 45 nations, was unchanged at 6.2 percent this year and 6.4 percent for next year.
“The growth outlook for developing Asia is stable, with the region projected to grow steadily,” the statement said, adding that downgrades for Central Asia, Southeast Asia and the Pacific regions were balanced by an upward revision for South Asia.
The ADB expects Chinese growth to remain at 7.5 percent this year with a slight drop to 7.4 percent next year.
It also said there was an improved outlook for India following the election of conservative Indian Prime Minister Narendra Modi.
The region’s GDP is now expected to grow 6.1 percent next year, compared with the previous estimate of 5.8 percent.
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