Asia's developing economies will not expand at the rate expected because of slower than forecast growth in U.S. and China, the Asian Development Bank (ADB) announced on Thursday.
China, slower economy
For China alone, full annual growth for 2015 is now estimated at seven percent, down from 7.2 percent previously and is to ease further to 6.8 percent next year, according to the ADB.
The ADB said that a slower Chinese economy is affecting the entire developing Asia region.
“We've got an economy that is essentially making an adjustment to a different growth model, one that relies less on exports and investment and one that is more reliant on growth and consumption,” ADB economist Joe Zveglich told VOA.
“A lot of the growth that China saw in decades past was coming from, essentially, the reforms that allowed them to catch up.”
The Chinese financial sector is also expected to contribute less to growth after the recent stock market correction, although the ADB report concludes the drop in stock prices will not likely have much impact on domestic consumption.
For all of developing Asia, according to the ADB, growth is projected at 6.1 percent, compared to the original forecast of 6.3 percent.
The bank, revising data it had released in March, now expects Southeast Asia to grow for this year at a rate of 4.6 percent based on disappointing numbers for the economies of Thailand, Indonesia and Singapore during the first half of this year.
Forecasted growth for Indonesia has been cut from 5.5 percent to five percent, in large part because there has been lower public spending than was expected with the new government.
“It took some time to get a budget in place. So public spending has not met our expectations. But we are expecting that with continued reforms in Indonesia that we will be seeing a pickup along the way,” said Zveglich in Manila.
Thailand's economy, struggling under a military government since a bloodless coup in May of last year, will only grow 3.2 percent, compared to the ADB's earlier prediction of 3.6 percent, partly due to slowing domestic consumption and drought affecting agriculture production.
“We were expecting a strong pickup this year with more political stability in place. But that shock to the agriculture sector is becoming a drag,” said Zveglich.
The one economic indicator on the rise for Southeast Asia is inflation, now expected at 3.4 percent – compared to an earlier forecast of 3.1 percent – due to higher-than expected inflation in Indonesia and Malaysia. Thailand has bucked the trend where inflation is not going to be as high originally forecast this year due to slowing domestic consumption, according to the ADB report.
The bank’s forecast for Vietnam’s growth in 2015 remains unchanged at 6.1 percent.
The bank, in its report released Thursday, makes no adjustment to its forecast of growth in India, which is 7.8 percent, noting a healthy monsoon and new investments.
South Asia as a whole is now expected to grow 7.3 percent this year, up slightly from 7.2 percent seen earlier, with a better-than-expected economic performance in Bangladesh balancing the earthquake-related slowdown in Nepal.
In 2016, growth for the South Asia subregion is expected to expand to 7.6 percent.
The ADB, which has 67 member states led by Japan and the United States, is to issue its next regional update to its economic forecasts in September.