The Asian Development Bank in its 2018 Asian Development Outlook released on April 11, 2018 raised its 2018 economic growth estimate for developing Asia from 5.8 percent to 6.0 percent citing solid export demand. However it pointed out that the U.S. protectionist measures and any retaliation against them could undermine trade in Asia. Further the bank said that the growth rate for Asia would moderate a little bit in 2019 to 5.9 per cent. According to ADB Strong external and domestic demand helped economies in the region expand by an average 6.1 percent last year.
According to the ADB forecast China’s economy is expected to grow 6.6 percent this year, faster than the bank’s prior estimate of 6.4 percent made in December and by 6.4 percent in 2019. China has set a growth target of around 6.5 percent this year, the same as last year, but it achieved a higher growth rate at 6.9 percent. But the ADB forecast that China’s growth will further moderate “as economic policy leans further toward financial stability and a more sustainable growth trajectory.”
By region, South Asia will remain the fastest growing in Asia Pacific, with the ADB pegging expansion this year at 7.0 percent and 7.2 percent in 2019. Despite growth easing to 6.6 percent in 2017, India’s economy is projected to bounce back to 7.3 percent in 2018 and to 7.6 percent in 2019 as the country’s new tax regime improves productivity. It said that banking reform and corporate deleveraging are also taking hold, which could reverse a downtrend in investment. Growth in Southeast Asia is forecast at 5.2 percent for this year and next, the same pace as 2017, while Central Asia is projected to slow to 4 percent in 2018 before picking up to 4.2 percent next year.
The ADB expressed apprehension that that although till now the protectionist trade measures by the United States has not made any remarkable dent in trade flows to and from Asia this year, the risks of the same happening cannot be ruled out. If trade war continues followed by action of the US and reaction, this could undermine the business and consumer optimism that underlies the regional outlook. It noted that China has blamed the United States for trade frictions amid escalating threats of tariffs on billions of dollars worth of goods between the world’s two biggest economies, sparked by U.S. frustration with China’s trade and intellectual property policies. Another risk to Asia’s growth, the ADB said, is “diminishing capital inflows if the U.S. Federal Reserve needs to raise interest rates faster than markets expect.” The Fed last raised rates in March and policymakers signaled two or three more hikes this year.