HONG KONG (BLOOMBERG) – The Asian Development Bank (ADB) has cut its forecast for gross domestic product growth in developing Asia this year as China’s Covid-19-zero approach to containing the virus creates ripple effects on regional supply chains and economic development.
The bank expects the region to grow 4.6 per cent this year compared with an earlier forecast of 5.2 per cent, according to a report published on Thursday (July 21). Growth in China, a key part of the developing Asia bloc, is expected to be a weaker 4 per cent in 2022 against a 5 per cent expansion seen previously.
The bank also slashed the forecast for East Asia – a region that includes China, Hong Kong, Taiwan and South Korea – to 3.8 per cent from 4.7 per cent.
Economic risks to Asia are “elevated and mainly associated with external factors”, the bank said, adding that tighter monetary policies from the United States Federal Reserve and other major central banks, as well as worsening fallout from Russia’s invasion of Ukraine, could hurt growth.
Within the region, downside risks could arise from “the potentially lingering effects on supply chains” from China’s “latest round of lockdowns and the country’s growth slowdown, which could hinder developing Asia’s growth momentum”, ADB said.
China’s outlook has been clouded by Covid-19 outbreaks and the ensuing restrictions intended to control them, along with an ongoing crisis in the property market. Economic growth slowed sharply to 0.4 per cent in the second quarter, when dozens of cities including Shanghai and Changchun imposed lockdowns. Many economists say China will likely miss its economic growth target of about 5.5 per cent this year by a significant margin.
In a speech to global business leaders hosted by the World Economic Forum this week, Chinese Premier Li Keqiang signalled a focus on jobs, along with flexibility on the growth rate.
South Asia’s growth forecast was lowered to 6.5 per cent from 7 per cent for 2022, and to 7.1 per cent from 7.4 per cent for 2023, mainly due to the economic crisis in Sri Lanka and high inflation and associated monetary tightening in India
The 2022 forecast for South-east Asia was marginally raised to 5 per cent from 4.9 per cent thanks to benefits from domestic demand following the lifting of Covid-19 curbs in some economies in the sub-region.