Growth is picking up in two-thirds of economies in developing Asia, supported by higher external demand, rebounding global commodity prices, and domestic reforms, making the region the largest single contributor to global growth, a new Asian Development Bank (ADB) report on Thursday said.
In its new Asian Development Outlook (ADO) 2017, the ADB forecasts gross domestic product (GDP) growth in Asia and the Pacific to reach 5.7% in 2017 and 2018, a slight deceleration from the 5.8% registered in 2016. ADO is ADB’s flagship annual economic publication.
“Developing Asia continues to drive the global economy even as the region adjusts to a more consumption-driven economy in the People’s Republic of China (PRC) and looming global risks”, Yasuyuki Sawada, ADB’s Chief Economist said.
“While uncertain policy changes in advanced economies do pose a risk to the outlook, we feel that most economies are well positioned to weather potential short-term shocks.” Industrial economies are gathering growth momentum, with the US, euro area, and Japan expected to collectively grow by 1.9% in 2017 and 2018.
Rising consumer and business confidence and a declining unemployment rate have fueled US growth, but uncertainty over future economic policies may test confidence.
The euro area continues to strengthen, but its outlook is somewhat clouded by uncertainties such as Brexit. Meanwhile, Japan remains dependent on its ability to maintain export growth to continue its expansion.
The PRC’s growth continues to moderate as the government implements measures to transition the economy to a more consumption-driven model.
Overall output is expected to slow to 6.5% in 2017 and 6.2% in 2018, down from 2016â€™s 6.7%. Efforts to maintain financial and fiscal stability will continue to be a modest drag on growth going forward, but continued structural reform will help to maintain growth in the government’s target range. South Asia remains the fastest growing of all subregions, with growth reaching 7% in 2017 and 7.2% in 2018.
The impact of the demonetization of high-value banknotes is dissipating as the replacement banknotes enter circulation. Stronger consumption and fiscal reforms are also expected to improve business confidence and investment prospects in the country.
Overall growth in Southeast Asia is forecast to accelerate further with nearly all economies in the region showing an upward trend. The region will grow 4.8% in 2017 and 5% in 2018, from the 4.7% recorded last year.