ADB reduces developing Asia growth forecast; leaves India unchanged

The Dollar Business Bureau

The Asian Development Bank (ADB) on Sunday reduced the 2016 growth forecast for developing Asia, citing reasons including the slowing down of the US economy and near-term shocks following Britain's decision to exit the European Union (EU) group.

The Philippines-based financial institution, however, said India is likely to meet its earlier growth forecast of 7.4% and 7.8% for the financial year 2016-17 and 2017-18.

"South Asia, meanwhile is expected to be the fastest growing sub-region, led by India, whose economy has shrugged off global headwinds and is on track to meet ADB's March fiscal year 2016 (year to March 2017) projected growth target of 7.4%, supported by brisk consumer spending and an uptick in the rural economy", ADB said.

The Asian Development Outlook 2016 report highlighted Asia’s less-exposed economy to the other global phenomenon, including Brexit. "Although the Brexit vote has affected developing Asia's currency and stock markets, its impact on the real economy in the short term is expected to be small," ADB chief economist Shang-Jin Wei said.

"However, in light of the tepid growth prospects in major industrial economies, policy makers should remain vigilant and be prepared to respond to external shocks to ensure growth in the region remains robust," he said.

The Bank projected developing Asia’s economy to expand at 5.6% this year, marginally weaker than its March forecast of 5.7%.

China is on track to grow at 6.5% in 2016-17 and 6.3% in 2017-18. The GDP growth rate of the world's second-largest economy grew slightly faster than expected during the second quarter of the current year, but private investments tanked to a record low, putting pressure on the government to come out with more stringent measures.

The ADB left unchanged the growth forecasts for Southeast Asia at 4.5% this year and 4.8% next year.