The Asian Development Bank (ADB) has slashed its economic growth forecast for Asia’s developing economies, pointing to challenges including China’s “zero COVID” lockdowns, the war in Ukraine and rising interest rates.
The Manila-based development bank said on Wednesday it had lowered its growth forecast for 2022 to 4.3 percent, down sharply from 5.2 percent in April.
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Excluding China, the rest of developing Asia is expected to grow by 5.3 percent in 2022 and 2023, the bank said.
The bank said that although the lifting of pandemic restrictions was spurring consumer spending and investment across the region, the war in Ukraine had “heightened global uncertainty, worsened supply disruptions, worsened supply disruptions, and unsettled energy and food markets.”
Interest rate hikes by the US Federal Reserve and the European Central Bank are also weighing on global demand, while new lockdowns in China have hampered growth in the world’s second-largest economy, the bank said.
The bank also lifted its inflation forecast to 4.5 percent in 2022 and 4 percent in 2023, up from 3.7 percent and 3.1 percent, respectively, due to soaring food and energy prices.
ADB Chief Economist Albert Park said “risks loom large” for the region’s developing economies despite the ongoing recovery.
“A significant downturn in the world economy would severely undermine demand for the region’s exports,” Park said.
“Stronger-than-expected monetary tightening in advanced economies could lead to financial instability. And growth in the People’s Republic of China faces challenges from recurrent lockdowns and a weak property sector.
“Governments in developing Asia need to remain vigilant against these risks and take the necessary steps to contain inflation without derailing growth.”