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Emerging Asia growing faster than China for 1st time in 30 years

Indonesia, Philippines are bright spots but India, Pakistan faltering, says ADB

MANILA — China’s COVID lockdowns mean its economic expansion this year will be slower than the rest of emerging Asia for the first time in more than three decades, the Asian Development Bank projected in a new report.

In an updated Asian Development Outlook report published Wednesday, the organization downgraded its forecast for China’s 2022 growth to 3.3% from 5.0% in April. The bank also cut its projection for next year to 4.5% from 4.8%.

Under its zero-COVID strategy, the region’s largest economy imposed lockdowns to fight outbreaks, even as other countries loosened restrictions to reopen their economies.

Those lockdowns, the ADB said, add to other economic challenges the region faces. These mainly stem from Russia’s drawn-out invasion of Ukraine, which has pushed up global food and fuel inflation and led advanced economies to raise interest rates.

Developing Asia as a whole is forecast to grow 4.3% in 2022, down from a 5.2% estimate in April. Excluding China, the region is projected to grow 5.3%, the ADB said.

The ADB defines developing (or emerging) Asia as one of its 46 regional members in Asia and the Pacific — basically all of the region’s economies except Japan.

For 2023, the emerging Asian region is forecast to grow 4.9%, instead of 5.3%.

“Developing Asia continues to recover, but risks loom large,” ADB Chief Economist Albert Park said in a statement.

“A significant downturn in the world economy would severely undermine demand for the region’s exports,” Park said. “Stronger-than-expected monetary tightening in advanced economies could lead to financial instability. And growth in [China] faces challenges from recurrent lockdowns and a weak property sector.”

The ADB projects regional inflation to accelerate to 4.5% this year, from 3.7% in its earlier forecast. Price increases are expected to stabilize at 4.0% next year, but that is still higher than the previous forecast of 3.1%.

The bank said rising inflation is expected to dent the recovery of South Asia, which is predicted to grow 6.5% this year, instead of 7.0%. The growth forecast for India, South Asia’s largest economy, has been cut to 7.0%, from 7.5%, with a 7.2% expansion predicted next year.

The economy of crisis-hit Sri Lanka is expected to shrink 8.8% this year, before the contraction eases to 3.3% in 2023. Pakistan, which grew 6% in its 2022 fiscal year ended June, is predicted to expand at a slower pace of 3.5% in 2023 as International Monetary Fund-backed efforts to fix the country’s fiscal deficit curtail economic activity, the ADB said.

Still, there are bright spots in other parts of the region.

Southeast Asia’s growth forecast for this year has been raised to 5.1% from 4.9%, and a 5.0% expansion is projected for 2023.

This year’s improved forecast comes amid stronger domestic demand in Indonesia, Southeast Asia’s largest economy, which is predicted to grow 5.4%, up from 5.0%. The Philippines is now estimated to expand 6.5%, rather than 6.0%.

Source: Nikkei Asia