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ADB forecasts slower growth for Asia in 2015
23
Sep '15
The Asian Development Bank's Annual Development Outlook report says growth in Asia faced strong headwinds in the first half of 2015. Regional growth is forecast to slow from 6.2 per cent in 2014 to 5.8 per cent in 2015, with a slight rebound to 6 per cent in 2016.

The report said the region must strengthen its ability to respond to external shocks. Emerging markets are facing receding capital flows and depreciating currencies - a trend that may be exacerbated by the upcoming rise in US interest rates. Implementing macro-prudential policies and developing local currency bond markets can bolster financial system resilience and mitigate risks to borrowers.

According to the report, delayed recovery in the major industrial economies and moderating prospects for the large economies of China and India weigh on the outlook, slackening the projected pace below even the 2014 rate of 6.2 per cent.

It noted that in the first half of 2015, harsh winter weather and labor disputes in West Coast ports slowed growth in the US, while an unexpectedly weak recovery in consumption and investment slowed expansion in Japan. On the other hand, the receding threat of a Greek debt crisis provided a fillip to growth projections for the euro area. Together, the major industrial economies are projected to expand by 1.9 per cent in 2015, 0.3 percentage points slower than the ADO 2015 projection, and 2.3 per cent in 2016.

The report said that despite robust consumption demand, economic activity in China fell short of expectations in the first 8 months of the year as investment and exports underperformed. Growth is forecast to slow from 7.3 per cent in 2014 to 6.8 per cent in 2015. As external demand strengthens with the pickup in growth in the industrial countries, and as improved financial conditions support investment, downward pressure on growth will ease. China is projected to grow by 6.7 per cent in 2016.

Prospects for India's growth acceleration await a pickup in external demand and reform progress. The report said GDP decelerated in the first quarter of fiscal year 2015 (ending 31 March 2016), as external demand weakened and investors hesitated awaiting further action on structural reform. Forecasts in ADO 2015 have been revised down by 0.4 percentage points to 7.4 per cent in FY 2015. Growth is expected to pick up to 7.8 per cent in FY 2016 as key elements of the government's economic reform package reach fruition.

For the five large economies in the Association of Southeast Asian Nations (ASEAN), the growth forecast for this year has been lowered to 4.8 per cent - a slight uptick from 2014 - before accelerating to 5.3 per cent next year. Subdued demand from the major industrial economies and the PRC dampened exports. Faster than- expected growth in Vietnam was more than offset by weakness in the other three economies. Planned infrastructure investment has fallen behind schedule in Indonesia and the Philippines, and Thailand's recovery to date has been sluggish.

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