Sino-US trade war, Brexit could slow developing Asia’s economic growth

• Radhakrishna N S
• 03 April, 2019

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By: Radhakrishna N S

GROWTH in developing Asia could slow for a second straight year in 2019 and lose further momentum in 2020, the Asian Development Bank (ADB) said on Wednesday (3), warning of rising economic risks from a bitter Sino-US trade war and a potentially disorderly Brexit.

Developing Asia, which groups 45 countries in the Asia-Pacific region, is expected to grow 5.7 per cent this year, the ADB said in its Asian Development Outlook report, slowing from a projected 5.9 per cent expansion in 2018 and 6.2 per cent growth in 2017.

The 2019 forecast represents a slight downgrade from its December forecast of 5.8 per cent. For 2020, the region is forecast to grow 5.6 per cent, which would be the slowest since 2001.

Yasuyuki Sawada, ADB’s chief economist, said in a statement: “A drawn out or deteriorating trade conflict between the People’s Republic of China and the United States could undermine investment and growth in developing Asia.”

The lender also cited uncertainties stemming from the US fiscal policy and a possible disorderly Brexit as risks to its outlook because they could slow growth in advanced economies and cloud the outlook for the world’s second largest economy.

“Though abrupt increases in the US interest rates appear to have ceased for the time being, policy makers must remain vigilant in these uncertain times,” Sawada said.

By region, South Asia will remain the fastest growing in the Asia Pacific, with the ADB predicting an expansion of 6.8 per cent this year, lower than its previous forecast of 7.1 per cent, and 6.9 per cent next year.

From an estimated 7.0 per cent growth in 2018, India’s economy is projected to expand at a faster pace of 7.2 per cent in 2019 and 7.3 per cent in 2020, the ADB said, as lower policy rates and income support to farmers boost domestic demand.

Citing stable commodity prices, the ADB lowered its average inflation forecast for developing Asia to 2.5 percent this year from 2.7 per cent previously, and it is expected to remain subdued at 2.5 per cent in 2020.

(Reuters)