The Asian Development Bank on Thursday cut its 2022 growth forecast for Asia’s developing world, warning that economic conditions could deteriorate as the war in Ukraine and supply chain disruptions push prices higher.
While the impact of Covid-19 has eased, the region is now grappling with the fallout from the Russian invasion of Ukraine, lockdowns in China and aggressive rate hikes, the Philippines-based bank said.
To reflect the deterioration in Asia’s developing world – stretching from the Cook Islands in the Pacific to Kazakhstan in Central Asia – the bank lowered its 2022 growth forecast to 4.6 percent.
That compares to its previous forecast in April of 5.2 percent and the 6.9 percent growth that was chalked up last year.
It also raised its inflation forecast for the region to 4.2 percent from 3.7 percent this year due to rising food and fuel prices.
Risks to the outlook “remain elevated,” the bank warned.
“A significant slowdown in global growth could hurt exports, manufacturing activity and employment prospects and cause turmoil in financial markets,” it said.
Double-digit inflation has hit most of the Caucasus and Central Asia — which have close trade and financial ties with Russia — as well as Mongolia, Pakistan, Sri Lanka, Laos and Myanmar.
India’s inflation was above target at 7 percent, but it was “manageable” in the region’s other major economies.
But the bank warned: “A worsening of the fallout from the war in Ukraine could lead to further increases in global energy and commodity prices, with likely knock-on effects on growth and inflation in developing Asia.”
Adding to the region’s woes was the stronger US dollar, seen as a safe haven in times of uncertainty, which the bank said weighed on regional currencies and stock markets.
“Growth in advanced economies is moderating as financial conditions tighten,” the bank said.
“And with operations in the PRC (China) hampered by supply chain disruptions, domestic demand and exports in developing Asia face significant challenges.”
The growth forecast for East Asia, which includes China, has been cut to 3.8 percent from 4.7 percent as Covid-19 lockdowns hit the world’s second largest economy.
In South Asia, where bankrupt Sri Lanka is reeling from its worst economic crisis, the bank lowered its growth forecast to 6.5 percent from a previous 7.0 percent.
But the bank revised its forecast for the Pacific to 4.7 percent from 3.9 percent on a surprise tourism recovery in Fiji.
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