The Asian Development Bank (ADB) has maintained its projection for 4.8% economic growth in developing Asia for the year 2023. Despite weak global demand and a decline in exports, the region is expected to benefit from strong consumption and investment.
The Manila-based multilateral bank recently released its July development outlook, in which it affirmed its economic growth forecast for the region. Developing Asia includes countries such as China, South Korea, and India, among others. The ADB also revised its 2024 forecast slightly downward to 4.7% from the previously projected 4.8% in April.
According to the ADB, the strength of domestic demand serves as a key driver for its projections. In the first quarter of this year, the aggregate GDP growth of the region’s ten largest economies accelerated to 3.7% from 2.1% in the second half of 2022. This was largely due to the services sector’s recovery after China lifted its zero-Covid policy.
However, external weakness continues to impact trade and manufacturing in developing Asia. The ADB acknowledges that global demand slowdown has led to a deceleration in exports and industrial activity within the region. Major economies are particularly affected, as monetary tightening measures take hold.
The ADB highlights that the manufacturing purchasing managers’ indexes present a mixed picture. While export-heavy countries like Singapore and South Korea are experiencing contractions, economies like India and Thailand are demonstrating strong growth.
On a positive note, the ADB notes that tourism is gradually recovering. Many economies are seeing tourist arrivals reaching levels comparable to the pre-pandemic era.
Overall, the ADB remains optimistic about the economic prospects of developing Asia, emphasizing the resilience of domestic demand as a crucial factor in sustaining growth.
Economic Outlook for China and Hong Kong
The Asian Development Bank (ADB) projects that China’s economic growth will reach 5.0% this year, in line with Beijing’s target of “around 5.0%,” and at 4.5% in 2024. Although indicators such as retail sales and exports show weaknesses, the ADB believes that the recovery will be sustained due to supportive monetary and fiscal policies.
In the case of Hong Kong, the ADB has revised its growth projection for 2023 significantly. It now expects a growth rate of 4.7%, up from the previous estimate of 3.6%, attributing this upward revision to an unexpectedly strong rebound in the first quarter. The ADB also anticipates a swift recovery in inbound tourism as transportation disruptions caused by the pandemic gradually subside and benefits from China’s growth momentum.
As inflation levels return to pre-pandemic averages and supply-side pressures ease, headline inflation is expected to decrease. Consequently, the ADB has lowered its regional inflation forecast for 2023 from 4.2% to 3.6%. However, when excluding China, where consumer-price inflation has been subdued in the first half, the figure increases to 6.2%.
Core inflation, which reflects underlying price pressures, varies across different East and Southeast Asian economies. Higher input prices and increased prices for services related to leisure activities have contributed to elevated core inflation in many countries.
Looking ahead, the ADB predicts that most central banks in the region will maintain steady interest rates throughout the year. However, there are indications of a growing shift towards looser monetary policies. The ADB emphasizes that the regional economic outlook will be influenced by interest rates in the United States and other advanced economies, with both upside and downside risks.
Overall, the ADB remains cautiously optimistic about the economic prospects of China, Hong Kong, and other East and Southeast Asian economies in the foreseeable future.