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Trade war, Brexit could slow developing Asia's 2019, 2020 growth: ADB

It says the group comprising 45 countries in Asia-Pacific will likely grow 5.7% in 2019, down from the last 2 years


GROWTH in developing Asia could slow for a second straight year in 2019 and lose further momentum in 2020, the Asian Development Bank (ADB) said on Wednesday, warning of rising economic risks from the China-US trade war and a potentially disorderly Brexit.

Developing Asia, which groups 45 countries in the Asia-Pacific region, is expected to grow 5.7 per cent this year, the ADB said in its Asian Development Outlook report, slowing from a projected 5.9 per cent expansion in 2018 and 6.2 per cent growth in 2017.

The 2019 forecast represents a slight downgrade from its December forecast of 5.8 per cent. For 2020, the region is forecast to grow 5.6 per cent, which would be the slowest since 2001.

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"A deteriorating trade conflict between the People's Republic of China and the United States could undermine investment and growth in developing Asia", Yasuyuki Sawada, ADB's chief economist, said in a statement.

The lender also cited uncertainties stemming from US fiscal policy and a possible disorderly Brexit as risks to its outlook because they could slow growth in advanced economies and cloud the outlook for the world's second-largest economy.

"Though abrupt increases in US interest rates appear to have ceased for the time being, policymakers must remain vigilant in these uncertain times," Mr Sawada said.

China's economy will probably grow 6.3 per cent this year, the ADB said, unchanged from its December projection, but slower than the country's 6.6 per cent expansion in 2018 despite recent government stimulus measures, including more tax cuts and increased state spending on infrastructure. Growth in the Chinese mainland is projected to cool further to 6.1 per cent in 2020.

Beyond trade risks, the ADB said China's growth will also be restrained by restrictions on shadow banking, which is expected to limit credit expansion even as fiscal stimulus provides some offset.

"I should emphasise although the government would like to stabilise growth, it wouldn't want to push up the growth rate as in previous years when you saw a big stimulus package, like in the period of 2008-2009," said Jian Zhuang, senior economist at ADB in Beijing.

Chinese banks may still remain reluctant to lower lending costs for companies partly on worries of rising risks of corporate defaults in a slowing economy. The central bank could take further actions, such as cutting the benchmark one-year lending and deposit rates, the ADB said.

China has set its 2019 economic growth target at 6 to 6.5 per cent.

By region, South Asia will remain the fastest growing in Asia-Pacific, with the ADB predicting an expansion of 6.8 per cent this year - lower than its previous forecast of 7.1 per cent - and 6.9 per cent next year.

From an estimated 7 per cent growth in 2018, India's economy is projected to expand at a faster pace of 7.2 per cent in 2019 and 7.3 per cent in 2020, the ADB said, as lower policy rates and income support to farmers boost domestic demand.

This year's growth forecast for South-east Asia was trimmed to 4.9 per cent from an earlier estimate of 5.1 per cent, as the Manila-based lender expect Malaysia, Singapore, Philippines and Thailand to grow slower than previously thought. Next year, South-east Asia is predicted to grow 5 per cent.

Citing stable commodity prices, the ADB lowered its average inflation forecast for developing Asia to 2.5 per cent this year from 2.7 per cent previously, and it is expected to remain subdued at 2.5 per cent in 2020. REUTERS