Asia-Pacific Economic Outlook Down as China’s Growth Slows

Port of Shanghai

MANILA, Philippines, August 7, 2022 (ENS) – The Asian Development Bank has lowered its economic growth forecast for developing Asia and the Pacific to 4.6 percent this year, down from a projection of 5.2 percent issued by ADB in April. The bank also raised its forecast for inflation in the region, amid higher prices for food and fuel.

The changes are due to slower expansion in the People’s Republic of China, PRC, more aggressive monetary tightening in advanced economies, and fallout from the continued Russian invasion of Ukraine, the bank said in a statement.

Developing Asia and the Pacific is continuing its recovery from the COVID-19 pandemic, according to ADB’s Asian Development Outlook 2022 Supplement, released late last month.

A COVID-19 outbreak in the city of Shanghai, China began on February 28 and ended on August 7, 2022. The outbreak was caused by the Omicron variant and became the most widespread in Shanghai since the pandemic began in early 2020. Government authorities imposed a lockdown that ended June 1.

Now, many countries are easing mobility restrictions, which is strengthening economic activity. But growth has slowed in China, the region’s largest economy, due to disruption from the COVID-19 lockdown, as well as weaker global demand, the bank’s Chief Economist Albert Park explained.

“The economic impact of the pandemic has declined across most of Asia, but we’re far from a full and sustainable recovery,” Park said from the ADB’s headquarters in Manila.

“On top of the slowdown in the PRC, fallout from the war in Ukraine has added to inflationary pressure that’s causing central banks around the world to raise interest rates, acting as a brake on growth. It’s crucial to address all these global uncertainties, which continue to pose risks to the region’s recovery,” Park said.

China’s economy is poised to expand 4.0 percent this year, compared with an earlier forecast of 5.0 percent, the bank says.

The PRC government counters with official Customs data released on Sunday showing China’s foreign trade up 10.4 percent over the Jan-July 2022 period.

China’s imports and exports totaled 23.6 trillion yuan (US$3.49 trillion) during the first seven months of the year, surging 10.4 percent year-on-year, the state newspaper “China Daily” reported today.

China’s trade values with the Association of Southeast Asian Nations, the European Union, and the United States during the period increased 13.2 percent, 8.9 percent and 11.8 percent year-on-year, respectively.

The Asian Development Bank also lowered its growth outlook for India to 7.2 percent from 7.5 percent amid higher-than-expected inflation and monetary tightening.

Inflation in developing Asia and the Pacific is predicted to accelerate to 4.2 percent this year, compared with a previous forecast of 3.7 percent. But inflation pressure in the region as a whole is still lower than elsewhere in the world.

For 2023, changes were more moderate. The ADB lowered its economic growth projection for the region to 5.2 percent from 5.3 percent, while raising the inflation forecast to 3.5 percent from 3.1 percent.

Growth forecasts for some subregions were upgraded. The outlook for Southeast Asia was raised to 5.0 percent this year from 4.9 percent amid increased domestic demand due to more relaxed COVID-19 restrictions.

The forecast for the Caucasus and Central Asia was raised to 3.8 percent from 3.6 percent as some economies in the subregion have withstood the economic fallout from Russia’s invasion of Ukraine better than expected.

In the Pacific, rebounding tourism in Fiji helped the subregion’s growth outlook improve to 4.7 percent from 3.9 percent.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 member governments – 49 from the region, the rest from Europe and Canada.

Featured image: Shanghai’s Yangshan Port in eastern China, April 15, 2022 (Photo by Ding Ting courtesy Xinhua)

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