In a supplement to its Asian Development Outlook Update 2017 report, ADB upgrades its 2017 growth domestic product (GDP) outlook in the region by 0.1 percentage points compared to its September 2017 forecast, while its 2018 forecast remains unchanged at 5.8%. An unexpectedly strong expansion in Central, East, and Southeast Asia has offset a downward adjustment in South Asia.
“Developing Asia’s growth momentum, supported by recovering exports, demonstrates that openness to trade remains an essential component of inclusive economic development,” said Yasuyuki Sawada, ADB’s Chief Economist. “Countries can further take advantage of the global recovery by investing in human capital and physical infrastructure that will help sustain growth over the long-term.”
Combined growth for the major industrial economies is revised upward to 2.2% for 2017 and 2% for 2018, due to robust domestic demand in the euro area, and in Japan due to private investment and net exports. Growth projections for the United States remain unchanged at 2.2% in 2017 and 2.4% in 2018.
By subregion, growth for East Asia is revised upward to 6.2% in 2017, from 6%, while 2018 projections of 5.8% are unchanged. Growth prospects in the People’s Republic of China (PRC)—the world’s second largest economy—are revised up on resilient consumption. Growth in the PRC is now expected to expand by 6.8% in 2017 and 6.4% in 2018.
South Asia will remain the fastest growing of all subregions in Asia and the Pacific, despite a downward revision from previous projections from 6.7% to 6.5% in 2017, and is expected to pick up to 7% in 2018. GDP growth in India—the subregion’s largest economy—is revised down to 6.7% in 2017 and 7.3% in 2018. Although the strong manufacturing expansion helped the economy reverse 5 consecutive quarters of deceleration in the second quarter of fiscal year 2017, the recovery is more subdued than assumed earlier due to rising crude oil prices, soft private investment growth, and weather-related risks to agriculture.
Growth for Southeast Asia is picking up faster than earlier forecast with GDP set to expand by 5.2% in 2017 and 2018, compared to September 2017 forecasts of 5% and 5.1%. The subregion is benefiting from stronger investments and exports, with accelerating growth for Brunei Darussalam, Malaysia, the Philippines, Singapore, and Thailand. Infrastructure investment continued to play an important role in Indonesia, the Philippines, and Thailand. Robust domestic demand—particularly private consumption and investment—will continue to support growth in the subregion, according to the report.
In Viet Nam, growth prospects are revised upward to 6.7% in both 2017 and 2018 compared to previous forecasts of 6.3% and 6.5%, respectively. The first 3 quarters of 2017 saw GDP grow by 6.4%, up from 5.9% in the same period of 2016. Agriculture recovered and grew by 2.8% in the first 9 months as drought eased in the Mekong Delta and the Central Highlands. Industry and construction remained strong despite drag from the mining and oil subsector, which contracted by 8.1% in the first half of the year.
Manufacturing grew robustly, expanding by 12.8% in the first 3 quarters of 2017, the highest rate of growth in the sector since 2011. Fourth quarter manufacturing growth, traditionally the sector’s strongest, is likely to exceed growth over the first 3 quarters. Driven by buoyant tourism and strong banking activity, services growth accelerated to 7.3% from 6.7% in the corresponding period in 2016.
The outlook for Central Asia this year has further improved as stronger domestic demand and exports in some countries have fueled recovery in the subregion. Growth is expected to reach 3.6% in 2017 compared to the 3.3% originally projected. The 2018 forecasts for Central Asia are unchanged at 3.9%.
Growth in the Pacific is expected to remain at 2.9% in 2017 and 3.2% in 2018 with Papua New Guinea—the subregion’s largest economy—continuing its gradual recovery due to rebounding mining and agriculture industries. Post-disaster reconstruction and tourism are expected to drive growth further in the subregion, particularly in Fiji and Vanuatu.
Meanwhile, rising commodity prices have not yet driven inflation across the region, with consumer price inflation tame and stable. Price inflation is unchanged from previous projections of 2.4% in 2017 and 2.9% in 2018.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2016, ADB assistance totaled $31.7 billion, including $14 billion in cofinancing.