HONG KONG: The Asian Development Bank said on Tuesday that growth across the region was holding stable despite global headwinds, with resilience in China and India keeping it on track.
GDP for developing Asia is predicted to grow 5.7 percent in 2016 and 2017, according to the bank’s latest report—down slightly from 5.9 percent in 2015.
“Strong growth in the PRC (China) and India is helping the region maintain its growth momentum,” said ADB’s deputy chief economist Juzhong Zhuang.
“Still, policymakers need to watch for the downside risks including potential capital reversals that could be triggered by monetary policy changes in advanced economies, especially the United States.”
Although China growth has dropped from 6.9 percent last year, its performance so far in 2016 surpassed the bank’s previous forecast, with fiscal and monetary stimulus measures behind the increase, the ADB report said.
The bank revised up slightly its predictions for China growth to 6.6 percent in 2016 and 6.4 percent in 2017. Both figures are up 0.1 percent from the bank’s previous report in March.
India saw a boost to private consumption after recently approved increases in wages and pensions, and a healthy monsoon is likely to lift rural incomes, the ADB said.
It maintained its growth forecast for India at 7.4 percent for 2016 and 7.8 percent for 2017, with improvements driven by a recovery in private investment and bank reforms.
However, a slow recovery in the US, the eurozone, and Japan will still weigh on the region, with question marks over monetary policy in those areas.
The report described risks to the regional outlook as “tilted to the downside”, with the possibility of a US Federal Reserve rate hike a possible threat to capital flows.
The ADB also warned policymakers against any move towards protectionism which it said “would only undermine the recovery”.
Looking to the future, the Manila-based regional bank said it was increasingly important for developing Asia to cut its carbon emissions, which went from 25 percent of the global total in 1990-1999 to 40 percent in 2012.
The effects of climate change, from shorter rainy seasons to droughts and outbreaks of disease could be catastrophic if unchecked, it said.
“If uncontrolled, climate change may lead to economic loss equivalent to 10 percent of GDP in 2100, reversing many hard-won socioeconomic gains in the region,” the report said.
The ADB promotes social and economic development in Asia and has 67 members, 48 from the region.