Growth remains strong across most of developing Asia as a result of the broad-based recovery in global trade, robust expansion in major industrial economies, and improved prospects for China. This will combine to push growth in developing Asia for 2017 and 2018 above previous projections, says a new Asian Development Bank (ADB) report.
In an update of its flagship annual economic publication, Asian Development Outlook (ADO) 2017, ADB forecasts gross domestic product (GDP) growth of 5.9% in 2017 and 5.8% in 2018 for developing Asia.
Growth across developing Asia is buoyed by a revival in trade. The dollar value of the region’s exports surged by 11% in the first 5 months of 2017 over the same period in the previous year, and the value of its imports rose by 17%. The pickup follows two consecutive years of contracting export values caused by falling commodity prices and subdued external demand for manufactures. Excluding China, the eight largest regional developing economies reportedly saw real manufacturing exports rebound.
Industrial economies’ growth will reach 2% in 2017 and 2018, up by 0.1 percentage points from the April 2017 forecast. Consumers are keeping the world’s largest economy on track, as the United States’ expansion enters its ninth year. Growth in Japan surprised on the upside, spurred by a combination of improving consumer confidence and business sentiment. Expansive fiscal and monetary policies, easing political uncertainty, and robust market confidence are driving the recovery in the euro area, the report said.
Expansionary fiscal policy and unanticipated external demand helped China exceed expectations in the first half of 2017. Output will increase 6.7% in 2017, an increase of 0.2 percentage points over the previous forecast. In 2018, growth will slow to 6.4% as anticipated reforms to trim industrial overcapacity and reduce financial risks kick in.
Growth forecasts for Central Asia are reportedly revised up this year and next amid stable oil prices, improving prospects for the Russian Federation, and rising remittances.
Risks to the Asia-Pacific region have reportedly become more balanced. Loose fiscal policy in the US and lower oil prices are potential upside risks to the region, while downside risks include tighter global liquidity, economic disruption from a geopolitical event, or a weather-related disaster. While the region remains better prepared for potential risks from the US unwinding its quantitative easing, high debt levels in Asia and the Pacific now pose a risk to financial stability. Because long-term interest rates in many Asian economies are closely linked to those in the US, policy makers need to strengthen their financial positions further and monitor debt levels and asset prices.
