China’s recovery from the COVID-19 pandemic and strong demand in India would drive economic growth in Asia this year, the Asian Development Bank (ADB) said in a report issued yesterday.
The Manila-based ADB’s latest update forecasts an expansion of 4.8 percent this year and the next, up from 4.2 percent last year.
It said inflation would likely cool slightly this year and fall further next year.
Photo: AP
ADB economists said a decision over the weekend by oil-producing nations to cut output, pushing oil prices sharply higher, might reignite inflationary pressures and add to challenges for the region.
The report’s analysis was based on the assumption that Brent crude oil, the pricing basis for international trading, would average US$88 a barrel this year and US$90 a barrel next year.
Oil prices remain below that level, with Brent at US$85.63 yesterday.
However, they soared about 5 percent after Saudi Arabia and other major oil producers said they would cut production by 1.15 million barrels per day from next month until the end of the year, on top of a reduction announced in October last year that infuriated US President Joe Biden’s administration.
“It’s certainly plausible that oil prices could go even higher and introduce another challenge for the region,” ADB chief economist Albert Park said in a conference call.
However, growing imports of Russian crude oil, especially by China and India, would likely cushion the impact of rising prices — such exports to China, India and Turkey more than doubled last year.
As of February, one-third of Russia’s crude exports were going to India and more than one-fifth to China.
Park said that inflation in Asia seems to be driven more by surging demand for services, such as tourism, than for goods.
Another factor that could push prices higher is China’s rebound from slow growth after its leaders lifted COVID-19 restrictions that disrupted travel, manufacturing and other business activities.
The ADB has forecast that China’s economy would grow 5 percent this year and 4.5 percent next year, an improvement over last year’s 3 percent growth, but slower than its long-term average.
India’s economy is expected to grow at a slower pace of 6.4 percent this year. That follows a 9.1 percent annual pace of expansion in 2021 as it rebounded from the worst of the pandemic, and 6.8 percent last year.
However, it is one of the fastest expansions for a major regional economy.
Vietnam is expected to see 6.5 percent growth this year, down from 8 percent last year. That is above the average forecast for Southeast Asia, at 4.7 percent this year and 5 percent next year. Vietnam’s central bank has begun cutting interest rates to counter a slowdown in its property sector and weakening exports.
A downturn in demand for computer chips has hurt the outlook for major exporters like Taiwan, Singapore and South Korea, the ADB said.
It cited a forecast by World Semiconductor Trade Statistics that sales in semiconductors would fall 4.1 percent this year from last year, but said demand is likely to recover later this year, as is typical in the highly cyclical industry.
Recent worries over the stability of the banking industry after bank failures in the US and Switzerland’s rescue of Credit Suisse Group AG with a partial takeover by its rival UBS Group AG are among other uncertainties facing the global and regional economy, the ADB said.
The war in Ukraine also might push prices for commodities such as oil, gas and wheat higher, further bedeviling central bank efforts to curb inflation, it said.
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