ADB trims growth forecasts for developing Asia, says India to grow 5.5% in 2014

Thursday, 18 December 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The Asian Development Bank slightly trimmed its growth forecast for developing Asia for this year and next, but said sliding prices for oil should help economies in the region push through with growth reforms. In its update to the 2014 outlook, ADB said on Wednesday developing Asia was now expected to grow 6.1% this year, a tad below its 6.2% forecast in September. Growth in 2015 was seen at 6.2%, from 6.4% previously.

“While growth in the first three quarters of this year was somewhat softer than we had expected, declining oil prices may mean an upside surprise in 2015 as most economies are oil importers,” said ADB Chief Economist Shang-Jin Wei. The ADB cut its 2014 and 2015 growth forecasts for China to 7.4% and 7.2%, respectively, from the 7.5% and 7.4% estimates made in September, due to falling property prices and the spillover effects on the construction sector. Reforms brought by Indian Prime Minister Narendra Modi will help his country grow 5.5% this year and, if they are extended, should lift growth to 6.3% next year, the ADB said. Southeast Asia is expected to grow slower than previously thought in 2014 and 2015 due to a slackening in economies in the region. The region is seen growing at 4.4% in 2014, down from a previous estimate of 4.6%, and 5.1% in 2015 instead of 5.3%. “Falling global oil prices present a golden opportunity for importers like Indonesia and India to reform their costly fuel subsidy programs,” Wei said. “On the other hand, oil exporters can seize the opportunity to develop their manufacturing sectors as low commodity prices tend to make their real exchange rates more competitive.” Since June, Brent crude LCOc1 has fallen 49% to below $ 60 a barrel, which means big savings for Southeast Asia’s large oil-importing economies – Thailand, Philippines and Indonesia. Inflation in the region in 2014 is now forecast to be lower at 3.2% in 2014 and 3.5% in 2015, compared to the 3.4% and 3.7% seen in September. The report is available on the ADB’s website, www.adb.org.