Asia Economies to Keep Growing Despite China Slowdown, Other Headwinds, ADB Says

By Fabiana Negrin Ochoa

Asia's economic expansion is expected to remain healthy this year despite a slowdown in China and uncertainty abroad, the Asian Development Bank said as it revised up forecasts for the region.

Growth in developing economies will be supported by resilient domestic demand, the Manila, Philippines-based multilateral bank said. The ADB now expects developing Asia to expand 4.9% in 2024, up from the 4.8% growth it had projected in December.

"The end of interest-rate hiking cycles in most economies as well as continued recovery in goods exports from an upturn in the semiconductor cycle will support growth," said Albert Park, chief economist at the ADB.

Consumer confidence is improving, investment is resilient, and external demand appears to be turning a corner, he added.

The artificial-intelligence boom offers a strong tailwind, driving a rebound in Asia's chip-making industry. Economies like South Korea can gain from rapidly growing AI-related demand for memory chips, as well as services like testing and packaging, the ADB said.

The bank also projects 4.9% growth in 2025 for the region, which comprises 46 of its members, including China, South Korea and India. That would be a touch lower than in 2023, which saw a bumpy, uneven recovery and regional growth clocking in at 5.0%.

This year, the ADB expects stronger growth in South and Southeast Asia to offset slowdowns in other subregions. China could exert a noticeable drag, while India will continue being a major growth engine.

The ADB projects China's economic expansion to slow to 4.8% this year and 4.5% the next, down from 5.2% in 2023. China's economy continues to be burdened by a property-sector crisis and weak consumer demand, which has been fading since a postpandemic opening boost.

The country's success in addressing the real-estate slump has implications for the wider region. A deterioration in China's property market could spill over into its trading partners, the ADB warned. Deflationary concerns are another risk, as lower export prices could transmit disinflation abroad, the bank said.

In India, growth is tipped to decelerate from last year's blistering pace but remain strong at 7.0%. That is forecast to pick up to 7.2% in 2025, "as rising consumption complements continued investment growth," the ADB said.

Inflation, which has been a major source of concern for many economies as prices of staples like rice surged, is forecast to ease. That's in part because monetary policies remain relatively tight despite some easing by central banks, the ADB said.

Developing Asia's inflation is projected to fall to 3.2% in 2024 from 3.3% in 2023, then cool further to 3.0% in 2025.

"In most subregions, the decline will come from lower global inflationary pressures and more stable fuel prices," the ADB said.

While the outlook is broadly positive, the report highlighted vulnerability to geopolitical tensions, which could disrupt supply chains and reignite inflationary pressures via commodity-price shocks.

Another uncertainty comes in the form of major central banks' policy path, particularly the Federal Reserve.

The timing of Fed cuts have been keenly watched in Asia as they have knock-on effects ranging from investor sentiment to foreign-exchange rates.

"Faster-than-expected disinflation could accelerate easing, supporting the growth outlook," the ADB said, and noted that tighter financial conditions could result in imported inflation.

"High global interest rates will remain a significant concern for economies in the region given high debt levels," the ADB said.

Write to Fabiana Negrin Ochoa at [e-mail]

(END) Dow Jones Newswires

04-11-24 0506ET