Growth in developing Asia is projected to soften to 5.7% in 2019 and 5.6% in 2020 from 5.9% in 2018, in tandem with slowing global demand and persistent trade tensions, according to the latest outlook from the Asian Development Bank (ADB).
The latest Asian Development Outlook (ADO) 2019, ADB’s flagship economic publication, said that excluding the newly industrialized economies of Hong Kong, South Korea, Singapore, and Taiwan, developing Asia is forecast to expand 6.2% in 2019 and a 6.1% in 2020. In 2018, growth was 6.4%.
“Growth overall remains solid with domestic consumption strong or expanding in most economies around the region. This is softening the impact of slowing exports,” said ADB chief economist Yasuyuki Sawada. “Uncertainty clouding the outlook remains elevated.”
Trade conflict between the United States and of China is still the primary risk to the region’s economic outlook with protracted negotiations propelling further global trade uncertainty. Other risks are a potentially rapid slowdown in advanced economies and China, as well as financial volatility.
By subregion, aggregate growth rates in Central Asia, East Asia, and Southeast Asia are expected to decelerate, while South Asia and the Pacific will bounce back from slowdown in 2018. South and Southeast Asia will grow more quickly in 2020 than in 2019.
Economic growth in East Asia decelerated by 0.2 percentage points to 6.0% in 2018, weighed down by weakening external trade and moderating investment in China but sustained by resilient domestic consumption. Expansion in China should moderate to 6.3% in 2019 and 6.1% in 2020 as global growth slows and economic policy targets a more sustainable growth trajectory. Economic growth in the whole subregion will slide to 5.7% in 2019 and 5.5% in 2020.
In South Asia, growth is expected to rise slightly from 6.7% in 2018 to 6.8% in 2019 and to 6.9% in 2020. Growth in India is forecast to pick up a bit to 7.2% in 2019 and 7.3% in 2020 from 7.0% in 2018 on recovery in agriculture and stronger domestic demand. Most other countries in South Asia are expected to maintain or slightly improve on their high growth rates.
Southeast Asia is seen to hold steady with some growth moderation. Subregional growth was marginally lower at 5.1% last year as strong domestic demand countered slowing exports. With weakening global growth, slowing trade, and softer commodity prices, export prospects dim further for these highly trade-engaged economies. Continued strength in domestic demand should nevertheless support growth at 4.9% this year and 5.0% next year. In half of the 10 subregional economies, growth is forecast to slow this year, while Indonesia and Laos will be unchanged, and Brunei Darussalam, Myanmar, and the Philippines will post higher growth. Strong consumption, spurred by rising incomes, stable inflation, and robust remittances is underpinning growth in Indonesia, Malaysia, the Philippines, Singapore, and Thailand, as is foreign investment in Cambodia and Vietnam, and large infrastructure projects elsewhere.
Central Asia will slow again after growth picked up in 2018. Growth in the subregion is forecast to slow to 4.2% in both 2019 and 2020 from 4.4% in 2018 with lower average oil prices trimming expansion in Kazakhstan, and despite improvement in Azerbaijan, Georgia, the Kyrgyz Republic, and Uzbekistan.
The Pacific continues to lag behind other subregions. Low growth at 0.9% in 2018 once again reflected developments in Papua New Guinea, the predominant economy in the subregion, which grew by a mere 0.2% following an earthquake in February that hit output of gold and liquefied natural gas. Subregional growth is forecast at 3.5% in 2019 and 3.2% in 2020, still the lowest in developing Asia.