The Asian Development Bank (ADB) has revised down its Asean 2015 GDP growth forecast to 4.4 per cent, a 10.20 per cent reduction to the 4.9 per cent Asean 2015 GDP growth forecast it made in March. For 2016 the ADB now forecasts a Southeast Asia 2015 GDP growth rate of 4.9 per cent, a 7.55 per cent cut to the 5.3 per cent it forecast earlier this year. In 2014 combined Southeast Asia GDP grew at 4.4 per cent.
The downgrading of the Asean 2015 GDP growth is in line with a 7.93 reduction made to the Developing Asia* 2015 GDP growth forecast the ADB made in March, while its amended Developing Asia 2016 GDP growth forecast of 6.0 per cent represent a 4.76 per cent reduction to its March forecast.
If the revised 2015 Developing Asia forecast is achieved it will represent a 6.45 per cent fall over the 2014 GDP growth rate of 6.2 per cent, while achievement of the amended 2016 figure will equate to a 3.23 per cent fall in the 2014 Developing Asia GDP growth rate.
Speaking during an update to the ADBs flagship annual economic publication, Asian Development Outlook (ADO) 2015, ADBs chief economist, Shang-Jin Wei, said Developing Asia will maintain its strong economic growth in 2015 and 2016 supported by soft commodity prices and recovery in the major industrial economies.
“Falling commodity prices are creating space for policy makers across the region to cut costly fuel subsidies or initiate other structural reforms. This is a key opportunity to build frameworks that will support more inclusive and sustainable growth in the longer term.”
Mr Wei said that from the trough of the global financial crisis in 2009, Developing Asia has contributed 2.3 percentage points to global GDP growth—almost 60 per cent of the world’s annual 4.0 per cent increase.
Eight economies in the region, including the People’s Republic of China (PRC), the Lao People’s Democratic Republic (Lao PDR), and Sri Lanka have posted growth exceeding 7.0 per cent in nearly every year of the post-crisis period, he noted.
Growth in the United States (US), where recovery seems to have turned a corner, is leading major industrial economies, while signs are mixed in the euro area and Japan, he added.
Noting that further slowing of investment in China is expected to diminish growth there to 7.2 per cent this year and 7.0 per cent in 2016, Mr Wei said increased investor confidence and stronger external demand is expected to see India overtake the PRC in terms of growth in 2015. The ADB forecasts India 2015 GDP growth (ending 31 March 2016) at 7.4 per cent, up 5.41 per cent over 2014. For 2016 the ADB forecasts India GDP growth to hit 8.2 per cent, a 10.81 per cent increase over 2014 India GDP growth.
Of particular concern to Asean’s industrial economies, Mr Wei said the bank forecast growth in these economies to slow to 1.9 per cent growth in 2015 from the 2.2 per cent forecast in March, a reduction of 13.64 per cent due to weak consumption and investment.
Mr Wei said that while soft global commodity prices, including oil and food, are keeping price pressures low and regional inflation was projected to decline 26.67 per cent to 2.3 per cent in 2015, from 3.0 per cent in 2014, this was expected to rebound in 2016.
Of concern to the ADB is the rate of capital outflows from developing Asian markets – exceeding $125 billion in Q1_2015 – which gained pace in the first half of the year in anticipation of a US interest rate hike. As a consequence the region has seen rising risk premiums and weakening exchange rates which could further impede growth momentum, Mr Wei said.
Other risks include slower than expected China growth, global interest rate uncertainty and reversal of capital flows, and additional currency depreciation, especially for economies where the corporate sector has incurred large amounts of foreign currency debt.
*Developing Asia refers to the 45 members of the Asian Development Bank: Central Asia comprises Armenia, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan. East Asia comprises the People’s Republic of China; Hong Kong, China; the Republic of Korea; Mongolia; and Taipei, China. South Asia comprises Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and SriLanka. Southeast Asia comprises Brunei Darussalam, Cambodia, Indonesia, the Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam. The Pacific comprises the Cook Islands, Fiji, Kiribati, the Marshall Islands,the Federated States of Micronesia, Nauru, Papua New Guinea, Palau, Samoa, Solomon Islands, Timor-Leste, Tonga, Tuvalu, and Vanuatu
- ADB cuts GDP forecast to 6% (Manila Bulletin)
- Asia’s trade recession deepens (The Financial Times)
- ADB cuts growth outlook on China softness, global weakness (Yahoo News/ AP)
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