Developing Asia will grow faster than previously thought this year, underpinned by a stronger-than-projected rebound in China, but risks from global banking turmoil could weigh on the outlook, the Asian Development Bank (ADB) said on Tuesday.
Developing Asia, which groups together 46 economies in the Asia-Pacific, is forecast to grow 4.8% in 2023, the ADB said in its Asian Development Outlook report, more than its previous estimate of 4.6% in December, and following 4.2% growth in 2022.
Driving the region’s growth this year is China’s recovery after it ended its zero-Covid policy in December, with the world’s second-biggest economy seen expanding 5% this year, the ADB said, above its earlier estimate of 4.3%.
China’s reopening “is really going to create the strongest kind of support for growth in the region this year,” said ADB Chief Economist Albert Park.
While China’s embattled property sector “remains a point of concern”, Park said the upside risks to China’s growth outlook outweigh downside risks. “If life returns to normal quickly and confidence comes back, growth could even be higher than 5% which would be even better for the region,” he said.
Excluding China, the region is expected to grow 4.6% this year, slower than last year’s 5.4% pace. Even as growth in developing Asia gathers pace, the ADB warned challenges remain, including turbulence in the global banking sector and an escalation in the Ukraine war, which could cause a surge in commodity prices.
But for now, turmoil in the global banking sector, will not turn into “a bigger crisis of the financial system in the US”, Park said even as he urged policymakers to stay vigilant. From 4.4% in 2022, inflation is forecast to decelerate to 4.2% this year and 3.3% next year, the ADB said, but warned that core inflation remained high in some economies and required close monitoring.
Published in The Express Tribune, April 5th, 2023.
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