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The Asian Development Bank now sees slower economic growth in emerging nations

Photo by Buddhika Weerasinghe/Getty Images

Continuing on a now well-worn path of groups downgrading economic growth forecasts, the Asian Development Bank (ADB) today lowered its GDP forecast for developing Asian nations in 2016 citing a weak recovery in major industrial economies and softer growth prospects for China.

The bank now expects growth 5.7% in both 2016 and 2017, below the 5.9% level achieved in 2015. Previously it saw growth of 6.0% this year. For developed nations, referred to as industrial economies by the ADB, it forecasts growth will remain at 1.8% this year before ticking up to 1.9% in 2017.

“[China’s] growth moderation and uneven global recovery are weighing down overall growth in Asia,” said Shang-Jin Wei, ADB’s chief economist following the release of the banks latest Asian Development Outlook report. “Despite these pressures, the region will continue to contribute over 60% of total global growth.”

On China, the ADB forecasts that economic growth will increase by 6.5% in 2016, down from the 6.9% increase in 2015, before slowing to 6.3% in 2017.

“Due to its outsized linkages, estimates suggest the drag from the growth moderation in China may be as much as 0.3 percentage points across the region,” said the ADB.

Despite expected weakness in China, the ADB suggests that India will remain one of the fastest growing major economies in the period ahead, predicting that economic growth will slow to 7.4% this year before accelerating to 7.8% in 2017.

Growth in Southeast Asian nations is also tipped to accelerate, rising to 4.5% in 2016 and 4.8% in 2017.

“Regional growth will be led by Indonesia as it ramps up investment in infrastructure and implements policy reforms that spur private investment,” said the ADB.

Expressing sentiment similar to that recently offered by US Federal Reserve chair Janet Yellen, and perhaps bolstering her view that Fed needs to “proceed cautiously” when determining the right time to next increase interest rates, the ADB suggests that risks to economic growth in emerging market nations remains to the downside.

“Potential interest rate hikes by the US Federal Reserve combined with broader weakness of emerging markets mean that risks to the regional growth forecast remain tilted to the downside,” notes the bank.

“Heightened investor risk aversion, intensified global financial market volatility, and a sharper-than-forecast growth slowdown in China would further weaken the global outlook and directly hurt regional exports and growth.”

The infographic below, supplied by the ADB, reveals the groups economic and inflation forecasts for developing Asian nations this year and next.

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