The Asian Development Bank (ADB) has revised its growth forecast for developing Asia upwards, predicting a 4.9% expansion in 2024. This slightly more optimistic outlook reflects the resilience of regional economies in the face of global headwinds.
The upward revision stems from robust domestic demand in many countries, offsetting the slowdown experienced by China, the region's powerhouse. The property sector's struggles and subdued consumer sentiment continue to weigh on China's growth, projected at 4.8% for 2024.
However, this is balanced by the strong performance of South and Southeast Asia. These sub-regions are experiencing a surge in both domestic demand and exports, propelling their growth trajectories. The ADB report, the Asian Development Outlook (ADO) April 2024, attributes this positive trend to a revival in domestic consumption and a pickup in the global semiconductor cycle, which benefits major exporters in the region.
Another factor contributing to the ADB's revised forecast is the gradual recovery of the tourism sector. After years of pandemic-induced restrictions, the return of international travel is injecting a much-needed boost into economies heavily reliant on tourism revenue.
Despite the positive outlook, the report acknowledges the presence of lingering risks. Rising geopolitical tensions, particularly in the Middle East, threaten to disrupt supply chains and exacerbate inflationary pressures. Additionally, the tightening of monetary policy by central banks in response to inflation could dampen economic activity in the region.
Albert Park, the ADB's Chief Economist, emphasizes the region's resilience in the face of these uncertainties. "Growth in developing Asia will remain robust this year, in spite of uncertainty in the external environment," Park states in the ADO report. He highlights the end of interest rate hikes in most economies, coupled with the upturn in semiconductor exports, as key drivers of continued growth.
The ADB expects inflation to moderate in 2024 and 2025, following a period of elevated food prices. This moderation is contingent on stable global commodity prices and effective policy responses from regional governments.
The report underscores the importance of continued policy support for the most vulnerable segments of society. The ongoing economic recovery must be inclusive, ensuring that the benefits of growth are distributed equitably. Investments in social safety nets and targeted support programs are crucial to mitigate the impact of rising prices on low-income households.
Looking ahead, the ADB maintains a growth forecast of 4.9% for developing Asia in 2025, indicating sustained economic momentum in the region. However, the report cautions that the trajectory will depend on managing external risks and fostering an environment conducive to inclusive growth.