MANILA: The Asian Development Bank Thursday trimmed its growth forecasts for China and developing Asia this year and next owing to weakness the world’s number two economy.
However, it said a pick-up in investment and the removal of red tape in India’s economy would continue to boost growth in the country but urged New Delhi must continue with its reforms.
After a slow first half, full-year gross domestic product (GDP) growth in China is now estimated at 7.0 percent this year and 6.8 percent next year, the Manila-based lender said in a statement.
That compares with its March estimate of 7.2 percent in 2015 and 7.0 percent next year.
“Slower growth in (China) is likely to have a noticeable effect on the rest of Asia given its size and its close links with other countries in the region,” chief ADB economist Wei Shang-Jin said.
Weaker-than-expected external demand, a declining working-age population and rising wages were all factors in the slowing growth of the Asian economic powerhouse, he added.
Beijing on Wednesday said its economy grew 7.0 percent in April-June, the same as the previous three months and in line with its target for the year. However, that would mark the slowest pace since 1990, a year after the Tiananmen Square crackdown.
Developing Asia as a whole is now expected to grow 6.1 percent this year and 6.2 percent in 2016, the ADB said, slower than the 6.3 percent previously predicted for each year.
Inflation was revised down to 2.4 percent from 2.6 percent this year, with the 2016 forecast of 3.0 percent unchanged.
Softness in major industrialised economies should lead to growth in East Asia — including China, Taiwan, South Korea and Hong Kong — to ease to 6.2 percent this year instead of 6.5 percent, the bank said.
It did not say if its 2016 forecast of 6.3 percent growth for the sub-region was changed.
Forecasts for India were unchanged at 7.8 percent in 2015 and 8.2 percent in 2016, backed by a healthy monsoon and new investments.
Growth next year will be driven by continued service-sector expansion and “the removal of procedural bottlenecks that have hampered investment”, the bank said.
However, it added “risks to growth prospects could emerge from further delay in passing some legislation crucial to easing land acquisition for industry and to implementing a uniform goods and services tax”.
India’s advance would help South Asian growth rise to 7.3 percent this year instead of 7.2 percent, the ADB said, with better-than-expected growth in Bangladesh balancing a quake-induced slowdown in Nepal.
In 2016 the sub-region should grow 7.6 percent, unchanged from March’s forecast.
Southeast Asia’s economic growth forecast was cut to 4.6 percent this year from 4.9 percent, and 5.1 percent next year from 5.3 percent.
Lower global commodity prices and the Russian recession will dampen growth in Central Asia, with the 2016 growth cut to 4.2 percent from 4.5 percent, though the 2015 forecast of 3.5 percent was unchanged.