The Asian Development Bank (ADB) cut this year’s GDP growth forecast in developing regions of Asia as China’s “zero COVID” approach to containing the virus creates ripple effects on regional supply chains and economic development.
The bank expects the region to grow 4.6 percent this year compared with an earlier forecast of 5.2 percent, it said in a report yesterday.
Growth in China, a key part of the developing Asia bloc, is expected to be weaker at 4 percent this year against a previous 5 percent expansion.
The bank also slashed the forecast for East Asia — a region that includes Taiwan, China, Hong Kong, and South Korea — to 3.8 percent from 4.7 percent.
South Asia’s growth forecast was lowered to 6.5 percent from 7 percent for this year, and to 7.1 percent from 7.4 percent for next year, given the economic crisis in Sri Lanka, and high inflation and associated monetary tightening in India.
Economic risks to Asia are “elevated and mainly associated with external factors,” the bank said, adding that tighter monetary policies from the US Federal Reserve and other major central banks, as well as worsening fallout from the war in Ukraine, could hurt growth.
Supply snarls from China’s latest round of lockdowns and growth slowdown there also pose downside risks to the region, the bank said.
“Because China is so critical to many of the supply chains in the region, that has effects on other economies, and that explains part of the slowdown broadly,” ADB chief economist Albert Park said yesterday.
China’s outlook has been clouded by restrictions the country has imposed to control COVID-19 outbreaks, along with an ongoing crisis in the property market.
Economic growth slowed sharply to 0.4 percent in the second quarter, when dozens of cities, including Shanghai and Changchun, imposed lockdowns.
Many economists expect China is likely to miss this year’s 5.5 percent economic growth target by a significant margin.
GDP is expected to increase 3.9 percent this year from a year earlier, an estimate from the latest Bloomberg survey of economists showed.
That is down from the prior survey estimate of 4.1 percent, as the nation’s “zero COVID” policy, a crisis in the property sector and a darkening global outlook continue to weigh on the economy.
For Asia more broadly, Park said the 4.6 percent forecast for the region points to a “pretty steady recovery from the pandemic.”
“Many countries are still recovering demand as COVID-19 has been pretty well managed this year,” Park said. “We’re seeing an underlying increase in demand that’s also driving recovery, as well as good export performance.”
That recovery supported the case for a marginal increase in this year’s forecast for Southeast Asia to 5 percent from 4.9 percent, with some economies in the region seeing benefits from domestic demand following lifts of COVID-19 curbs.
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