Expanding economies in Asia deliver 60% of global growth, ADB says

Judith QuinnApr 10, 2017

The ADB's latest forecast is, however, slightly lower than its estimate in the supplement to its Asian Development Outlook 2016 Update report in December past year, where it pegged GDP growth at 7.8 per cent this fiscal.

In its Asian Development Outlook 2017 report, the multilateral development bank said it is retaining its domestic growth expectation for 2017 but foresees domestic economic output to recover to 6.6 percent growth in 2018 as the government ramps up infrastructure spending.

She said inflation and the current-account deficit would go along with GDP growth in the near term, projecting that inflationary pressures will continue to firm up from 6.5 per cent last year to 7 per cent this year and 7.5 per cent next year.

Next year, developing Asia should again grow by 5.7 percent, the ADB said in its 2017 Asia Development Outlook report.

Industrial economies are gathering growth momentum, with the U.S., euro area, and Japan expected to collectively grow by 1.9 percent in 2017 and 2018.

The report further said that South Asia would remain the fastest growing of all subregions, with growth reaching 7 per cent in 2017 and 7.2 per cent in 2018.

ADB officials noted Thursday that the regions combined gross domestic product was projected to expand by 5.7 percent in both 2017 and 2018.

Sawada said the region faces "risks from uncertain policy direction in the advanced economies, including the pace of interest rate normalisation in the United States".

Finance Minister AMA Muhith on Wednesday said the economy may even grow at 7.5 percent. However, the continued structural reform would help in maintaining growth in the government's target range there.

A deceleration of growth to 7.1% in the previous fiscal (2016-17) was attributed to slow growth in investment combined with the impact of note-ban.

"One is the US interest rate increase", he said, referring to up to two more hikes by the US Federal Reserve that are widely expected this year following 25-basis point increases each in December 2015 and 2016, as well as last month, after almost a decade of near-zero levels.

Presenting the ADB outlook, its Principal Country Specialist (Bangladesh) Jyotsana Varma said the GDP growth will slow down with the decline in the agricultural and export growths and the rise in import growth.

South Asia, however, will see a faster 7.0% average. The ADB warned that the recent surge in inflation in the USA could prompt the Fed to accelerate the pace of its monetary tightening, and that Asian economies with high corporate and household debt are vulnerable to any resulting financial shocks. "However, with likely higher global prices for oil and other commodities, upward adjustments to natural gas and electricity prices as the government continues to align prices with production costs, and further implementation of salary hikes introduced in FY2016 for government staff and private educational institutions to adjust for inflation and improve living standards".

On the domestic front, rising household debt in some Asian economies is a rising risk.

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