HONG KONG: Developing Asian countries will drive the world economy in the next two years, the Asian Development Bank (ADB) said, but it warned of uncertainties from the United States and Europe.
Its flagship Asian Development Outlook report said India, Malaysia, Indonesia and Vietnam would be behind an expected 5.7% increase in Asia-Pacific gross domestic product, with China’s expansion seen moderating.
“Developing Asia continues to drive the global economy even as the region adjusts to a more consumption-driven economy in the People’s Republic of China,” ADB’s chief economist, Yasuyuki Sawada, said in a statement.
With China’s economy seen slowing to 6.5% growth in 2017 and then 6.2% in 2018, regional expansion is tipped to come in slightly weaker than the 5.8% seen last year.
Chinese growth is at its weakest levels in a quarter of a century, hit by a drop in global demand for its goods but also as its leaders try to transform it from an economy driven by trade and state investment to one supported by domestic demand.
The Manila-based regional bank also warned that the uncertain outlook in the United States and Europe threw up risks.
As the US economy continues to strengthen, expectations are for the Federal Reserve to raise interest rates further this year – having already been lifted twice since December.
Higher Fed borrowing costs tend to hit emerging economies as it means investors withdraw their cash to seek better and safer returns in the US.
“Rising consumer and business confidence and a declining unemployment rate have fuelled US growth, but uncertainty over future economic policies may test confidence,” the ADB said.
There are also lingering worries about President Donald Trump’s warnings to revise global trade deals, fuelling speculation he could spark a trade war.
The bank also said that while the eurozone was also strengthening, any potential growth was clouded by the uncertainty of Britain’s decision to leave the European Union.
But Sawada added: “While uncertain policy changes in advanced economies do pose a risk to the outlook, we feel that most economies are well positioned to weather potential short-term shocks.”
Growth in South Asia is expected to hit 7% this year and 7.2% next year, with India rebounding from demonetisation that temporarily hit the economy.
India’s growth is expected to hit 7.4% in 2017 and 7.6% in 2018. — AFP