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ADB: Trade war, Brexit could slow developing Asia's 2019, 2020 growth

  • Published at 11:37 am April 3rd, 2019
Asian Development Bank (ADB) Headquarters Collected

 The 2019 forecast represents a slight downgrade from its December forecast, but the 2020 forecast shows the slowest growth rate since 2001

Growth in developing Asia could slow for a second straight year in 2019 and lose further momentum in 2020, the Asian Development Bank (ADB) said on Wednesday, warning of rising economic risks from a bitter Sino-US trade war and a potentially disorderly Brexit. Developing Asia, which groups 45 countries in the Asia-Pacific region, is expected to grow 5.7 this year, the ADB said in its Asian Development Outlook report, slowing from a projected 5.9% expansion in 2018 and 6.2% growth in 2017. 

 The 2019 forecast represents a slight downgrade from its December forecast of 5.8%. For 2020, the region is forecast to grow 5.6%, which would be the slowest since 2001.

 "A drawn out or deteriorating trade conflict between the People's Republic of China and the United States could undermine investment and growth in developing Asia", Yasuyuki Sawada, ADB's chief economist, said in a statement. The lender also cited uncertainties stemming from US fiscal policy and a possible disorderly Brexit as risks to its outlook because they could slow growth in advanced economies and cloud the outlook for the world's second largest economy. 

"Though abrupt increases in US interest rates appear to have ceased for the time being, policy makers must remain vigilant in these uncertain times," Sawada said. 

China's economy will probably grow 6.3% this year,the ADB said, unchanged from its December projection, but slower than the country's 6.6 % expansion in 2018. Growth in the Chinese mainland is projected to cool further to 6.1% in 2020. 

China has set its 2019 economic growth target at 6.0 to 6.5%.

By region, South Asia will remain the fastest growing in Asia Pacific, with the ADB predicting an expansion of 6.8% this year - lower than its previous forecast of 7.1% - and 6.9% next year. 

From an estimated 7.0% growth in 2018, India's economy is projected to expand at a faster pace of 7.2% in 2019 and 7.3% in 2020, the ADB said, as lower policy rates and income support to farmers boost domestic demand. 

This year's growth forecast for Southeast Asia was trimmed to 4.9% from an earlier estimate of 5.1%, as the Manila-based lender expect Malaysia, Singapore, Philippines and Thailand to grow slower than previously thought. Next year, Southeast Asia is predicted to grow 5.0%. 

Citing stable commodity prices, the ADB lowered its average inflation forecast for developing Asia to 2.5% this year from 2.7% previously, and it is expected to remain subdued at 2.5% in 2020.