Rising private consumption and stronger intraregional trade will boost Asia’s developing economies over the next two years, according to the Asian Development Bank.
In its Asian development outlook 2013, published today, the Bank forecast growth of 6.6% this year for the 45 countries it categorises as ‘developing Asia’. This compares with 6.1% in 2012/13. It adds that stronger external demand and a strengthening global economy will help increase this further to 6.7% in 2014/15, it added.
Growth last year was depressed by a larger-than-expected slowdown in the group’s two largest economies, China and India. China’s economy grew by 7.8%, its lowest rate in 13 years, as a result of slower exports and a cooling real estate market, while India recorded an estimated 5% – its lowest rate in a decade.
However, the ADB now expects rising domestic demand and improved exports to contribute to 8.2% growth in China this year before slipping back slightly to 8% in 2014.
ADB chief economist Changyong Rhee said: ‘The country’s new leaders are focused on delivering sustainable, quality growth, which is a welcome change from the growth-at-all-costs approach of the past. They will face a difficult task in managing risks and keeping the economy on an even keel, while shepherding through the complex reforms needed to deliver more inclusive growth.”
India will also see an upturn as its economy expands by 6% this year and 6.5% next year, the report said.
China’s improved growth is expected to have spillover effects for East Asian economies such as Taipei and Mongolia, as well as for South East Asian economies. The largest of these, Indonesia, is forecast to grow by 6.5% in 2013, up from 6.2% last year.
Rhee added: ‘The rebound in People’s Republic of China and solid momentum in Southeast Asia are lifting the region’s pace after the softer performance of 2012. Domestic spending, in particular consumption, is the main driver of the recovery, and is a welcome shift from the reliance on the markets of advanced economies.’
In Central Asia, higher public spending – in particular in Kazakhstan and Azerbaijan – will help to keep growth relatively consistent, with last year’s 5.6% expansion followed by 5.5% this year and 6% in 2014/15.
However, the Pacific, the fastest growing sub-region in developing Asia last year with 7.3% growth, is expected to show a marked slowdown. Its largest economy, Papua New Guinea, is forecast to record 5.5% growth after 9.2% this year. The sub-region as a whole is expected to post 5.2% growth this year and 5.5% in 2014.
Public Finance International