Developing Asia will maintain its strong economic growth in 2015 and
2016 supported by soft commodity prices and recovery in the major industrial
economies, says a new Asian Development Bank (ADB) report.
ADB’s flagship annual economic
publication, Asian Development Outlook 2015 (ADO),
released today, forecasts developing Asia will achieve gross domestic product
(GDP) growth of 6.3% in both 2015 and 2016. The region also grew 6.3% in 2014.
“Developing Asia is making a
strong contribution to global economic growth,” said ADB Chief Economist
Shang-Jin Wei. “Falling commodity prices are creating space for policy makers
across the region to cut costly fuel subsidies or initiate other structural reforms.
This is a key opportunity to build frameworks that will support more inclusive
and sustainable growth in the longer term.”
From the trough of the global
financial crisis in 2009, developing Asia has contributed 2.3 percentage points
to global GDP growth—nearly 60% of the world’s annual 4.0% pace. Eight
economies in the region posted growth exceeding 7.0% in nearly every year of
the post-crisis period, including the People’s Republic of China (PRC), the Lao
People’s Democratic Republic, and Sri Lanka.
Growth in the United States (US),
where recovery seems to have turned a corner, is leading major industrial
economies. While signs are mixed in the euro area and Japan, soft oil prices
and accommodative monetary policy will support growth. As a group, these
economies are forecast to expand by 2.2% in 2015, up 0.6 percentage points from
2014, and 2.4% in 2016.
With improving external demand for
the region’s outputs, an expected pickup in India and in most members of the
Association of Southeast Asian Nations (ASEAN), could help balance gradual
deceleration in the PRC, the region’s largest economy.
Growth slowed in the PRC in 2014
on weak fixed asset investment, particularly in real estate. As the government
proceeds with its structural reform agenda, further slowing of investment is
expected to diminish growth to 7.2% in 2015 and 7.0% in 2016. This is a much
more moderate rate than the average growth of 8.5% in the period since the
global financial crisis.
India is forecast to overtake the
PRC in terms of growth as the initial phase of government efforts to remove
structural bottlenecks is lifting investor confidence. With the support of
stronger external demand, India is set to expand by 7.8% in FY2015 (ending 31
March 2016), a sharp rise from 7.4% growth in FY2014. This momentum is expected
to build to 8.2% growth in FY2016, aided by expected easing of monetary policy
and a pickup in capital expenditure.
Risks to the outlook include
possible missteps in the PRC as it adjusts to its new normal, less decisive
action on reforms in India than anticipated, potential spillover effects on the
global economy of the Greek debt crisis and the deepening recession in the
Russian Federation. The impending rise in US interest rates may reverse capital
flows to the region, requiring monetary responses to maintain stability. The
benefits flowing from the low price of oil could evaporate if geopolitical
tensions push it sharply higher.
Across the subregions, economic
growth in East Asia will slow to 6.5% in 2015 and 6.3% in 2016 reflecting the
moderation in the PRC. The subregion grew 6.6% in 2014. Mongolia will see
growth decelerate sharply in 2015 as foreign direct investment dries up and
fiscal and monetary policies are tightened. Growth will be stable in
Taipei,China, but accelerate in Hong Kong, China, and Republic of Korea,
reflecting rising domestic demand and the improving global economy.
Growth in South Asia accelerated
to 6.9% in 2014 and is projected to trend higher to 7.2% in 2015 and 7.6% in
2016, reflecting the strong performance anticipated in India. Both Bangladesh
and Pakistan are following through with wide-ranging economic reforms that
include efforts to overcome power shortages, though political challenges may
limit progress in 2015. Sri Lanka’s economy is expected to moderate in 2015 as
investors await clarity on the new administration’s plans for governance reform
and economic policy.
Southeast Asia is poised for a
growth rebound in 2015 after subregional growth fell to 4.4% in 2014. Aggregate
growth is seen rebounding to 4.9% in 2015 and 5.3% in 2016 as recovery in
Indonesia and Thailand leads the way, and with most of the subregion expected
to benefit from rising exports and lower inflation.
Weak oil prices and recession in
the Russian Federation pushed subregional growth in Central Asia down 1.5
percentage points to 5.1% in 2014. In 2015 growth will slacken in Kazakhstan,
Turkmenistan, and Uzbekistan as lower petroleum exports constrain domestic
spending. The weak economy in the Russian Federation will curb export and
remittance flows, slowing growth in Armenia, Georgia, the Kyrgyz Republic, and
Tajikistan. Average growth in the subregion is forecast at 3.5% in 2015 and
4.5% in 2016.
GDP growth in the Pacific reached
6.1% in 2014, accelerating for the first time in 3 years as natural gas exports
began in Papua New Guinea (PNG), the subregion’s largest economy, and expansion
picked up in most other economies. In 2015, the first full year of gas
production in PNG, growth in the Pacific is expected to peak at 10.7% before
falling back to 4.5% in 2016, with only a few economies growing faster than in
the previous year.
This article was first published by the Asian Development
Bank (www.adb.org)"
http://www.adb.org/news/adb-sees-strong-growth-developing-asia-2015-and-2016
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