ADB Retains Developing Asia's Growth Outlook

Developing Asia is set to grow robustly, underpinned by the strong performance by China and India, despite external pressures, the Asian Development Bank said Tuesday as it retained its growth projection for the region.

Gross domestic product of developing Asia is forecast to grow 5.7 percent each in 2016 and 2017, as estimated in March, the Manila-based lender said in its latest the Asian Development Outlook.

The ADB noted that risks to the outlook remain tilted to the downside, with the external environment still fragile and the possibility of a US Federal Reserve Rate hike leaving open the potential for disruptive capital flows that could complicate macroeconomic policy management in the region.

In the update of its flagship annual economic publication, the ADB raised its growth outlook for China, citing stronger-than-expected growth in the region driven by fiscal and monetary stimulus.

China was forecast to grow 6.6 percent this year and 6.4 percent next year, suggesting an upward revision of 0.1 percentage points for both this year and next.

India's growth forecast for this fiscal year ending March 2017 was left unchanged at 7.4 percent, supported by strong private consumption. Moreover, the milestone tax reform passed this year and progress in restructuring bank balance sheets should help revive investment and propel growth of 7.8 percent next fiscal year, the ADB said.

"Strong growth in the PRC and India is helping the region maintain its growth momentum," said Juzhong Zhuang, ADB deputy chief economist.

"Still, policymakers need to watch for downside risks including potential capital reversals that could be triggered by monetary policy changes in advanced economies, especially the US."

Driven by India, South Asia was forecast to retain its rapid growth with GDP rising 6.9 percent this year and 7.3 percent next year, unchanged from the March forecasts.

At the same time, Southeast Asian economies will see growth edge up to 4.5 percent this year on the back of robust government infrastructure investment, supported by strong performances from the Philippines and Thailand, the lender said.

Due to depressed oil and gas prices, low foreign demand and lower remittances, Central Asian economies are forecast to remain under pressure. Growth for the sub-region was revised down to 1.5 percent from 2.1 percent for 2016. But the rate is expected to pick up to 2.6 percent next year.

Meanwhile, the Pacific sub-region will post softer growth than previously projected, with growth forecast at 2.7 percent in 2016 compared to the earlier outlook of 3.8 percent, the ADB said.