ADB keeps Asia GDP forecast, warns trade dispute risk remains

MANILA, NNA – The Asian Development Bank expects growth of developing economies in Asia to be “strong but moderating” this year and next amid the U.S.-China trade row.

The Manila-based multilateral lender released its quarterly outlook on Thursday.

Key points:

-- The ADB is keeping its growth outlook for developing Asia, which comprises 45 economies, at 5.7 percent in 2019 and 5.6 percent in 2020. “Unexpectedly, strong growth in Central Asia offsets small downgrades for East, South, and Southeast Asia in 2019, with growth slowing marginally…in 2020,” it said.

-- Excluding the newly industrialized economies of Hong Kong, China, South Korea, Singapore and Taiwan, regional growth was revised down slightly to 6.1 percent from 6.2 percent previously for both 2019 and 2020.

-- The ADB forecast for major industrial economies comprising the U.S., the euro area and Japan was maintained at 1.9 percent for 2019 and 1.6 percent for 2020. “Upward revisions to growth prospects in the U.S. are offset by downward adjustments to euro area growth forecasts,” the bank said.

-- China’s economy is still projected to grow by 6.3 percent in 2019 and 6.1 percent in 2020 as “policy support offsets softening growth in domestic and external demand.” However, East Asia’s growth outlook was revised down to 5.6 percent from 5.7 percent as South Korea’s expansion in the first quarter slowed down sharply.

-- ADB lowered its growth forecast for Southeast Asia to 4.8 percent for 2019 and 4.9 percent in 2020 from 4.9 percent and 5 percent previously, as the region’s economy grew less than expected. “The subregion’s more open economies faced the combined impacts of the trade conflict and a trough in the electronics cycle, which were partly offset by strong domestic demand,” it said.

-- The outlook for South Asia is projected at 6.6 percent this year and 6.7 percent in 2020, lower than the previous forecasts of 6.8 percent and 6.9 percent, as the ADB slightly downgraded its forecast for India.

-- Central Asia’s growth outlook in 2019 was revised up to 4.3 percent from 4.2 percent, as the forecast for Kazakhstan improved. Its growth outlook for 2020, meanwhile, remains unchanged at 4.2 percent.

Takeaway:

-- The ADB said the U.S.-China trade dispute remains the key downside risk to Asia. “Trade tensions persist between the world’s two largest economies, albeit with a truce called in June after escalation in May,” it said. “The trade conflict is now having discernible effects on regional investment and trade patterns.”

-- While Southeast Asia is now experiencing the impact of the trade conflict, the ADB said trade and production redirection is now appearing as direct foreign investments and exports are growing in some countries such as Vietnam.

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