Developing Asia’s Economic Outlook Downgraded As China Growth Slows

Source: Vientiane Times

The Asian Development Bank (ADB) has lowered its economic growth forecast for developing Asia including Laos to 4.6 percent this year, from 5.2 percent projected in April.

The downgraded projection of economic growth was due to slower expansion in China, more aggressive monetary tightening in advanced economies, and the consequences of the Russia-Ukraine conflict.

Developing Asia and the Pacific is continuing its recovery from the Covid-19 pandemic, according to ADB’s “Asian Development Outlook (ADO) 2022 Supplement”.

Many countries are easing mobility restrictions, which is strengthening economic activity.

However, growth has slowed in China, the region’s largest economy, due to disruption from new Covid lockdowns, as well as weaker global demand, according to the ADB.

“The economic impact of the pandemic has declined across most of Asia, but we’re far from a full and sustainable recovery,” said ADB Chief Economist Albert Park.

Laos’ economic prospects in 2022 are looking dimmer because of declining consumer and business confidence caused by rising prices and a weaker local currency. But the outlook is expected to improve in 2023.

The economy of China (which is a key trading partner for Laos) is poised to expand 4.0 percent this year, compared with an earlier forecast of 5.0 percent. ADB also lowered its growth outlook for India to 7.2 percent from 7.5 percent amid higher-than-expected inflation and monetary tightening.

In Vietnam (another key trading partner of Laos), trade continued to expand in the first half of 2022, and domestic mobility, manufacturing, and consumption rapidly recovered.

However, Vietnam’s economy faces challenges from a deteriorating external economic environment triggered by the aggressive monetary tightening of advanced economies and growth moderating in China.

The growth forecast in Vietnam is maintained at 6.5 percent for this year and 6.7 percent for next year.
The GDP of Thailand (another important trading partner of Laos) expanded 2.2 percent year-on-year in the first quarter as improved global demand supported economic activity.

“Private consumption recovered on relaxed Covid domestic mobility and international travel restrictions. Growth in the quarter was also buoyed by rising international arrivals,” the ADB stated.

Despite generally positive developments, growth forecasts in Thailand are revised down slightly from 3.0 percent to 2.9 percent for 2022 and from 4.5 percent to 4.2 percent for 2023.

Nevertheless, the outlook for Southeast Asia was raised to 5.0 percent this year from 4.9 percent amid increased domestic demand due to more relaxed Covid restrictions.

South Asia’s inflation forecast is revised up from 6.5 percent to 7.8 percent for 2022.

In the smaller economies, rising fuel prices and a significant currency drop against the US dollar are building up pressure on inflation, particularly in Laos and Myanmar.

Headline inflation is at double digit levels in most of the Caucasus and Central Asia, in Mongolia, Pakistan, Sri Lanka, Laos and Myanmar.