Chinese workers work on a construction site at sunset in Chongqing, China.
Asia’s emerging economies may be showing signs of recovery, but the Asian Development Bank (ADB) cut its growth forecasts for them again – thanks to China’s protracted zero-covid policy.
But this will be the first time in more than three decades that the rest of developing Asia will grow faster than China, the Manila-based lender said in its latest outlook report released Wednesday.
“The last time was in 1990, when growth (in China) slowed to 3.9%, while GDP in the rest of the region increased by 6.9%,” it said.
The ADB now expects developing Asia – excluding China – to grow by 5.3% in 2022 and China by 3.3% in the same year.
Both figures are further cuts – in July, for example, it lowered its growth forecast for China from 5% to 4%. The ADB attributed that to sporadic shutdowns from the country’s zero-covid policy, problems in the real estate sector and slowing economic activity in the face of weaker external demand.
It also lowered its 2023 forecast for China’s economic growth to 4.5%, compared to April’s 4.8% forecast that “deteriorating external demand continues to weigh on manufacturing investment”.
Recovery doesn’t help
While the region is showing signs of continued recovery from a revived tourism, global headwinds are slowing overall growth, the ADB said.
For the region, the ADB now expects emerging Asian economies to grow 4.3% in 2022 and 4.9% in 2023 – a lowered outlook from the revised July forecast of 4.6% and 5.2%, respectively. according to the latest outlook report released Wednesday.
The latest updates to the Asian Development Outlook also projected that the pace of price increases will accelerate even further to 4.5% in 2022 and 4% in 2023 – an upward revision of the July forecast of 4.2% and 3%, respectively. 5%, citing added inflationary pressures from food and energy costs.
“Regional central banks are raising their key rates as inflation has risen above pre-pandemic levels,” it said. “This is contributing to tighter financial conditions amid declining growth prospects and accelerated monetary tightening by the Fed.”
China the ‘big exception’
“The PRC remains the big exception due to the intermittent but strict lockdowns to eradicate sporadic outbreaks,” the ADB said, referring to the People’s Republic of China.
In contrast, “easing pandemic restrictions, increasing immunization, declining Covid-19 death rates and the less severe health effects of the Omicron variant support improved mobility across much of the region,” it added in the report.
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