The Asian Development Bank (ADB) has raised its economic growth forecast for developing Asia and the Pacific this year, amid solid domestic demand and continued strength in exports. ADB has also lowered its forecast for regional inflation.
The region is forecast to grow by 5.0% this year, compared with a projection of 4.9% in April, according to Asian Development Outlook (ADO) September 2024, released on September 25. The forecast for next year is maintained at 4.9%. Inflation in developing Asia and the Pacific is expected to ease further to 2.8% in 2024, compared with a previous forecast of 3.2%.
The improved economic outlook reflects stronger-than-expected expansions in East Asia, Caucasus and Central Asia, and the Pacific. Rising global demand for semiconductors, driven in part by the artificial intelligence boom, is boosting exports, while easing global food prices and the lagged effects of monetary policy tightening have brought inflation down to near pre-pandemic levels.
“Strong economic fundamentals will continue to underpin expansion this year and next,” says ADB Chief Economist Albert Park. “Financial conditions are expected to improve as inflation moderates further and the US eases its monetary policy, and this will support the positive outlook for the region.”
Risks to the outlook include a worsening of trade tensions between the US and People’s Republic of China (PRC), further deterioration in the PRC property market, worsening geopolitical tensions, and the effects of climate change and adverse weather on commodity prices and food and energy security.
The growth forecast for PRC, the largest economy in developing Asia and the Pacific, remains at 4.8% this year, and 4.5% next year. Lingering weakness in PRC’s property sector has negatively affected household spending during 2024. This has been partially offset by higher investment, underpinned by stimulatory monetary and fiscal policies, and higher exports.
India’s economy – the region’s second largest – is forecast to grow 7.0% in 2024, unchanged from April, amid strong domestic demand including an increase in government spending.
The growth forecast for the Caucasus and Central Asia has been raised to 4.7% this year, up from the 4.3% projection in April, thanks to improved domestic demand bolstered by remittances in some economies. The growth forecast for the Pacific is revised upwards to 3.4%, versus 3.3% in April, driven by the increase in tourist arrivals. The forecast for Southeast Asia has been lowered by 0.1 percentage points to 4.5%, due to a decline in public investments and slower-than-expected export recovery.
© 2024 Institute of Singapore Chartered Accountants