ADB cuts Asia growth forecast for 2016 on China global drag

MANILA: The Asian Development Bank slashed its economic growth forecast for developing Asia this year, citing global headwinds and a weaker outlook for China.Developing Asia will expand 5.7 percent this year and in 2017, the Manila-based lender said in its latest Asian Development Outlook released on Wednesday.In its December outlook report, the ADB had forecast 2016 growth for the region at 6.0 percent.The region, which groups 45 countries in the Asia Pacific, grew 5.9 percent last year.”Risks are tilted to the downside as tightening US monetary policy may heighten financial volatility, further moderation in China could spill over into its neighbors, and producer price deflation may undermine growth in some economies,” said ADB chief economist Shang-Jin Wei.The ADB forecast growth in China, the world’s second-largest economy, would slow to 6.5 percent this year from 6.9 percent in 2015, its weakest expansion in a quarter of a century. Growth is projected to slow further to 6.3 percent in 2017, ADB said.The bank’s 2016 forecast for China, down from a December estimate of 6.7 percent, is at the lower end of Beijing’s own target of 6.5-7 percent as the government presses ahead with painful reforms, though Premier Li Keqiang has vowed that would not lead to a hard landing.Weak prices for oil and other commodities also cast a shadow over the prospects of Asia’s commodity-dependent economies, the ADB said.In the United States, expanding private consumption and investment will be tempered by weak external demand, the ADB said. US Federal Reserve policymakers have cited continuing risks from a shaky global economy in halving the number of potential interest rate hikes this year to two.Growth in India will slip to 7.4 percent this year from 7.6 percent in 2015, but should recover to 7.8 percent in 2017, the ADB said.For all of South Asia, ADB forecast growth at 6.9 percent in 2016 and 7.3 percent in 2017, versus growth of 7.0 percent last year.Economies in Southeast Asia are projected to expand 4.5 percent this year, from 4.4 percent in 2015, and by 4.8 percent in 2017.For East Asia, ADB sees growth at 5.7 percent in 2016 and 5.6 percent in 2017. The region grew 6.0 percent last year.Central Asia is estimated to expand by 2.1 percent this year and 2.8 percent in 2017, following growth of 2.9 percent in 2015, the bank said.Annual inflation in developing Asia is expected to recover to 2.5 percent this year from 2.2 percent in 2015 as domestic demand strengthens, ADB said. A rebound in global commodity prices next year should lift inflation to 2.7 percent, it said.