ADB trims Asia’s growth forecast, retains India’s at 7.6% for 2019

Indian economy continues on a robust growth path as it recovers from temporary shocks resulting from the demonetization of large bank notes and the introduction of a national Goods and Services Tax in 2017. Improved domestic demand, steady revival in industrial growth and reduced drag from net exports are expected to help Indian economy maintain its growth numbers.

According to an update of flagship annual economic publication by the Asian Development Outlook (ADO), India is expected to grow at a healthy 7.3 per cent in the current fiscal and 7.6 per cent in FY 2019.

ADB expects growth to maintain its strength and pick up next year as the economy continues to adjust to the reforms and investor sentiment improves. India's economy grew by a strong 8.2 per cent in the first quarter of FY 2018.

Further, in its Asian Development Outlook report, the ADB maintained developing Asia's growth forecast at 6 per cent this year, but trimmed the projection for 2019 to 5.8 per cent from 5.9 per cent in July amid the growing trade dispute between the world's two largest economies and tighter global liquidity.

The United States and China has imposed fresh tariffs on each other's goods as the world's biggest economies showed no signs of backing down from an increasingly bitter trade dispute that is expected to hit global economic growth.

Meanwhile, China's growth projection for this year has been kept at 6.6 per cent, but next year's outlook has been slashed by 0.1 percentage point to 6.3 per cent amid sluggish demand growth and the grumpy relationship with the U.S. Beijing has set a growth target of around 6.5 per cent this year, the same as last year, which it handily beat with an expansion of 6.9 per cent.

South Asia is poised to remain as the fastest growing in the region as the ADB maintained its growth estimates of 7 per cent for this year and 7.2 per cent for next year.

However, moderating export growth, hastening inflation, net capital outflows and a deterioration balance of payments clouded the growth outlook for Southeast Asia, with growth this year projected to slow to 5.1 per cent from the July forecast of 5.2 per cent.

In addition to the trade war, signs of the U.S. economy overheating could prompt the Federal Reserve to raise interest rates at a faster-than-expected pace, which would pose a risk for countries in the region already contending with currency weakness and the threat of capital flight. Countries with elevated private debt like Malaysia, China, South Korea and Thailand could experience destabilizing effects on their financial sectors.

Latin Manharlal Group