Chinese workers working on a construction site at sunset in Chongqing, China.
Asia’s developing economies may be showing signs of recovery, but the Asian Development Bank (ADB) slashed its growth forecasts once again, thanks to China’s long-running zero-Covid policy.
But this will be the first time in more than three decades that the rest of Asia’s developing countries will grow faster than China, the Manila-based lender said in its latest outlook report released on Wednesday.
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“The last time was in 1990, when (China’s) growth slowed to 3.9% while the rest of the region’s GDP expanded by 6.9%,” he said.
The ADB now expects developing Asia excluding China to grow 5.3% in 2022, and China 3.3% in the same year.
Both figures are further downgrades: In July, for example, it cut its growth forecast for China from 5% to 4%. The ADB attributed that to sporadic closures from the nation’s zero-Covid policy, problems in the real estate sector and slowing economic activity in light of weaker external demand.
It also lowered its 2023 forecast for China’s economic growth to 4.5% from April’s 4.8% outlook on “deteriorating external demand that continues to hold back investment in manufacturing.”
Recovery doesn’t help
Although the region is showing signs of continued recovery through revived tourism, global headwinds are slowing overall growth, the ADB said.
For the region, the ADB now expects emerging Asia to grow 4.3% in 2022 and 4.9% in 2023, a downward outlook from July’s revised predictions of 4.6% and 5. 2% respectively, according to their latest outlook report published on Wednesday.
The latest updates to the Asian Development Outlook also predicted that the pace of price increases will further accelerate to 4.5% in 2022 and 4% in 2023, an upward revision from the July predictions of 4.2%. and 3.5% respectively, citing additional inflationary pressures from food. and energy costs.
“Regional central banks are raising their policy rates as inflation has risen above pre-pandemic levels,” he said. “This is contributing to tighter financial conditions amid a diminishing growth outlook and accelerated monetary tightening by the Fed.”
China the ‘great exception’
“The PRC remains the big exception due to its intermittent but strict lockdowns to crack down on sporadic outbreaks,” the ADB said, referring to the PRC.
In contrast to that, “relaxing pandemic restrictions, increased immunization, falling covid-19 death rates, and the less severe health impact of the Omicron variant are underpinning better mobility in large part.” of the region,” he added in the report.