Asia’s economies seem to be on track for a solid year, as growth holds steady and inflation slows, even with risks tilted to the downside, the Asian Development Bank said in its latest report.
Resilient demand at home and strong exports are helping offset risks from trade and geopolitical tensions for Asia’s developing economies, the multilateral bank said Wednesday. It nudged up its forecast for the year, projecting gross domestic product growth of 5.0% versus the 4.9% predicted in April. That compares with an expansion of 5.1% last year.
Manila, Philippines-based ADB expects the region, comprising 46 of its members—including China, South Korea and India—to notch roughly the same pace of growth next year.
“Shifting away from the postpandemic recovery driven mostly by domestic demand, exports rebounded and are helping propel the region’s growth,” ADB economists said.
Strong global appetite for chips and electronics offers a key tailwind for Asia. While this traditionally benefits high-technology goods producers like South Korea and Taiwan, ADB notes that other economies like the Philippines and Vietnam are gaining from the current semiconductor boom.
ADB raised its 2024 economic growth forecasts for Taiwan and South Korea to 3.5% and 2.5%, respectively, from 3.0% and 2.2% previously.
Regional growth will continue to be led by India, which ADB continues to project is on track to expand 7.0%. The South Asian powerhouse lost some steam in the first quarter but an anticipated rebound in agriculture and strong industrial activity should lend support, the bank said.
India’s momentum could help offset the regional drag posed by China’s slowdown. Excluding China, ADB projects growth in developing Asia at 5.1% this year.
A stream of data showing continued weakness in the Chinese economy has fueled renewed doubts about the country’s ability to hit its GDP growth target of around 5%. Soft retail sales suggest consumer confidence is still low, and the housing market remains in crisis, having yet to show signs of stabilization.
ADB said that its 2024 growth outlook for China remains unchanged at 4.8% at this juncture. While second-quarter growth was below market expectations, the economy outperformed in the first three months of the year, ADB Principal Economist John Beirne said.
“Looking ahead to the remainder of the year, continued fragility in the property sector remains a risk, but policy support and the recovery in exports will help to underpin growth,” he added.
Importantly for the regional outlook, inflation, which has been a point of worry for several economies, is expected to cool further as tight monetary policy and easing global food prices, ADB said.
The bank now expects inflation in Asia to decline to 2.9% this year from 3.3% last year, before stabilizing at 3.0% in 2025. It had projected 2024 inflation at 3.2% in April.
Still, uncertainty continues to cloud the outlook for the region. The impact of elections in major economies, a deeper China property slump and unexpected weather events all pose threats to Asia’s growth trajectory, the report said.
“While growth projections remain broadly unchanged, downside risks persist, including heightened geopolitical tensions, trade fragmentation, and uncertainties related to elections,” ADB said.
Write to Rthvika Suvarna at Rthvika.Suvarna@wsj.com and Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com
