Led by India, South Asia will continue to be the fastest growing economic area despite new trade tensions in Asia and Pacific region, Asian Development Bank (ADB) said in a new report on Thursday.
Growth in Asia and the Pacific’s developing economies for 2018 and 2019 will remain solid as it continues apace across the region, despite rising tensions between the US and its trading partners, said a supplement to the Asian Development Outlook (ADO).
“South Asia, meanwhile, continues to be the fastest growing sub-region, led by India, whose economy is on track to meet fiscal year 2018 projected growth of 7.3 per cent and further accelerating to 7.6 per cent in 2019, as measures taken to strengthen the banking system and tax reform boost investment,” it said.
The ADO published in April had said that India’s economic growth will rise to 7.3 per cent this fiscal and further to 7.6 per cent in the next financial year, retaining the fastest-growing Asian economy tag, on back of GST and banking reforms.
“Although rising trade tensions remain a concern for the region, protectionist trade measures implemented so far in 2018 have not significantly dented buoyant trade flows to and from developing Asia, said ADB Chief Economist Yasuyuki Sawada.
Prudent macroeconomic and fiscal policy-making will help economies across the region prepare to respond to external shocks, ensuring that growth in the region remains robust.
- Healthy domestic demand reinforces regional prospects detailed in Asian Development Outlook 2018. This Supplement maintains growth projections at 6.0% for 2018 and 5.9% for 2019, despite global rumblings. Excluding newly industrialized economies, regional growth is forecast at 6.5% in 2018 and 6.4% in 2019, as envisaged in April.
- East Asian growth is on track to meet April forecasts of 6.0% in 2018 and 5.8% in 2019. The People’s Republic of China is still expected to grow by 6.6% in 2018 before moderating to 6.4% in 2019.
- South Asia remains the fastest expanding subregion, with growth projected at 7.0% in 2018 and 7.2% in 2019. India is expected to achieve April forecasts of 7.3% in 2018 and 7.6% in 2019 as bank-strengthening bolsters private investment and benefits kick in from a new goods and services tax.
- Southeast Asia continues to be buoyed by robust domestic demand, particularly for private consumption and investment. It is on track to meet forecasts of 5.2% growth this year and next.
- Central Asia has performed better than expected, prompting growth projection upgrades to 4.2% for 2018 and 4.3% for 2019. The Pacific will likely realise earlier forecasts.
- Despite rising commodity prices, domestic factors have kept consumer price pressures in check regionally, prompting downward revision to inflation forecasts from 2.9% to 2.8% for both years. As US monetary policy normalizes, central banks in the region act to spare their currencies’ sharp depreciation and to subdue inflation.
- Trade tariffs implemented so far in 2018 have not significantly dented buoyant flows, but ongoing friction remains a downside risk to the outlook for developing Asia.
(With inputs from PTI)