ADB sees global slowdown gradually trimming Asian growth in 2019 and 2020

04, Apr. 2019

MANILA, NNA – Slower global demand amid the lingering U.S.-China trade row will take some of the steam out of economic growth in Asia this year and next, according to the Asian Development Bank.

The Manila-based multilateral lender released its quarterly Asian Development Outlook for 2019 Wednesday.

The bank’s Director of Macroeconomic Research, Abdul Abiad, told news media Wednesday that growth is still very high and moderating at a very gradual pace. “We should remember that Asia still contributes the bulk of global growth,” he said.

Key Points:

―― Asia’s GDP growth is expected to continue slowing to 5.7 percent this year from 5.8 percent in 2018, moderating further to 5.6 percent next year. Excluding the newly industrialized economies, developing economies in Asia are forecast to grow at a rate of 6.2 percent in 2019 and 6.1 percent in 2020.

―― The U.S.-China trade dispute remains the primary risk to the region’s economic outlook as protracted negotiations between the world’s two largest economies continue. A potential rapid slowdown in Europe, the United States and China and resulting volatility in financial markets also pose risks to Asia.

―― Aggregate growth in the three major advanced economies -- the U.S, the euro zone and Japan – is likely to decelerate to 1.9 percent in 2019 and 1.6% in 2020 after slowing to 2.2 percent in 2018 from 2.3 percent in 2017, partly due to the shift to less accommodative fiscal and monetary policies in the U.S and the uncertainty surrounding Brexit in Britain and the European Union.

―― China’s economic growth is expected to moderate from 6.6 percent in 2018 to 6.3 percent in 2019 and 6.1 percent in 2020. This is largely due to the “structural changes in the economy away from industry and towards services, and financial tightening as the government seeks to control financial risks.” ADB’s China outlook is within Beijing’s downgraded growth target range of 6 percent to 6.5 percent for this year.

―― By contrast, India’s growth is expected to pick up from 7 percent in 2018 to 7.2 percent in 2019 and 7.3 percent in 2020 on strong domestic demand and lower policy interest rates. South Asia is seen expanding 6.8 percent this year and 6.9 percent in 2020, up from 6.7 percent last year, outperforming other subregions.

―― Growth in Southeast Asia is forecast to slow to 4.9 percent this year from 5.1 percent in 2018 before edging up to 5.0 percent in 2020. The ADB downgraded the Philippines’ GDP growth to 6.4 percent for 2019 from its earlier projection of 6.7 percent, but it said growth will still be higher than the 6.2 percent seen last year, thanks to strong domestic investment.

Takeaway:

―― Despite slowing global growth, the ADB does not expect a recession. “The numbers are still consistent with expansion, but with a slower expansion than in the past,” Abiad said.

―― The contribution of private consumption to overall output in Asia increased to 3.7 percentage points in 2018 from 3.4 percentage points in 2017. “Fortunately for [Asia], domestic demand has been strong and that is offsetting the external weakness,” Abiad said.