The Asian Development Bank (ADB) has slashed its economic forecasts for Asia, citing deteriorating conditions due to China’s “zero COVID” lockdowns, rising interest rates in developed economies and the war in Ukraine.
Asia’s developing economies, which include China and India, are expected to grow 4.6 percent in 2022 and 5.2 percent in 2023, according to the ABD’s latest economic outlook released on Thursday.
The ADB in April predicted the region’s developing bloc would expand 5.2 percent and 5.3 percent, respectively.
China’s economy is forecast to expand 4 percent, revised down from 5 percent, amid “disruption from new COVID-19 lockdowns” and “weaker global demand”.
Defying a global trend towards living with COVID-19, authorities in the world’s second-largest economy are continuing to roll out lockdowns and travel restrictions as part of a draconian “dynamic zero COVID” policy aimed at stamping the virus out.
India’s economy is predicted to grow 7.2 percent this year, down from a 7.5 percent expansion forecast in April, although growth is anticipated to rebound to 7.8 percent in 2023.
Bucking the negative trend, Pacific island nations’ growth outlook was revised upward to 4.7 percent, from 3.9 percent, amid a stronger-than-expected rebound in tourism in Fiji.
“The economic impact of the pandemic has declined across most of Asia, but we’re far from a full and sustainable recovery,” ADB Chief Economist Albert Park said.
“On top of the slowdown in the PRC, fallout from the war in Ukraine has added to inflationary pressure that’s causing central banks around the world to raise interest rates, acting as a brake on growth. It’s crucial to address all these global uncertainties, which continue to pose risks to the region’s recovery.”
While facing less severe price pressures than other parts of the world, developing Asia is also expected to experience worsening inflation over the next two years.
Inflation is forecast to hit 4.2 percent in 2022 and 3.5 percent in 2023, compared with previous forecasts of 3.7 percent and 3.1 percent, respectively.
The ADB’s sombre outlook is the latest warning shot for the global economy as China’s economic slowdown, interest rate hikes in advanced economies, and the Ukraine crisis raise fears of a global economic downturn.
The International Monetary Fund earlier this month said it would “substantially” downgrade its outlook for the global economy in its next update after already slashing its growth forecast for 2022 from 4.4 per cent to 3.6 per cent to take into account Russia’s invasion of Ukraine.