Developing Asia expected to post slowest growth in 16 years in 2017

Jeannette Daniel
April 10, 2017

The Asia Development Outlook 2017 report states slower investment growth and the government's demonetisation of high-value currency notes resulted in lower growth of 7.1 per cent in FY16.

Meanwhile, China's growth forecast has receded from 6.7% in 2016 to 6.5% in 2017, further declining to 6.2% in 2018 as per the predictions by ADB.

According to Ramayandi, ADB anticipated three to four interest hikes from the Federal Reserve this year bringing the rate to range from 1.25 to 1.5 percent, with another possible four hikes next year to bring the rate at a range of 2.25 to 2.5 percent.

However, the ADB pointed to risks to its rosier outlook, including higher US interest rates and rising household debt in some Asian economies.

"Export forecasts assume that policy uncertainty in the US, United Kingdom, and euro area is resolved in ways not inimical to expansion in global trade lows and that the garment industry continues to improve worker safety and welfare", the ADO said.

Sustained growth, however, also requires continued efforts to improve infrastructure and deepen structural reform.

"The GDP growth will slow down with the decline in the agricultural and export growths and the rise in import growth", said Jyotsana Varma, Principal Country Specialist of the Manila based development partner while presenting the outlook at a press conference at its office on Thursday.

Elsewhere, growth will be lifted by spending on quake reconstruction in Nepal, hydropower investment and output in Bhutan, and economic corridor investment from the PRC in Pakistan.

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Transcending the Middle-Income Challenge which ADB published yesterday showed the regional lender retaining its 6.4% GDP growth projection for the Philippines this year which it first penciled in December 2016.

Industrial economies are gathering growth momentum, with the USA, euro area, and Japan expected to collectively grow by 1.9% in 2017 and 2018.

With almost all economies in Southeast Asia showing an upward trend, the region should expand by a faster 4.8 percent this year and pick up to 5.0 percent next year, the ADB said.

Finance Minister AMA Muhith on Wednesday said the economy may even grow at 7.5 percent. Among its beneficiaries are commodity producers such as Indonesia, Malaysia and Vietnam. It has pegged inflation at 5.2 per cent in 2017-18 and 5.4 per cent in 2018-19.

Chongvilaivan said rising oil prices and the protectionist stance adopted by many countries will increase commodity prices and global trade uncertainties, which would pose a threat to the country's economic growth, particularly this year.

Economies with high corporate or household debt in particular would be most vulnerable to the shock of higher interest rates, the report said.

However, Asian economies need to be wary of persistent domestic and external risks. Authorities may also have to intervene more decisively in housing markets to cool speculative demand and head off asset bubbles.

Other reports by My Hot News

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