SOUTH-EAST Asia has largely recorded weaker economic performance across the region, with the Asian Development Bank (ADB) downgrading its growth forecasts for this year and the next.

The ADB made the forecasts in its Asian Development Outlook (ADO) September 2023 report. 

The bank had already cut its 2023 growth forecasts to 4.6 per cent from 4.7 per cent in its April report. Growth is anticipated to pick up next year to 4.8 per cent, but this is still a downward revision from the previous 5 per cent. 

Slowing global growth, high commodity prices and tightened global financial conditions contributed to the revised growth prospects, said the report, which was released on Wednesday (Sep 20).  

Contractions of manufactured export growth have hurt major exporting economies in the region, it noted. “Accelerated rate hikes in major economies created a credit crunch that dragged down demand.” 

In particular, six of the 10 Asean member-states – Cambodia, Laos, Malaysia, the Philippines, Singapore and Vietnam – as well as Timor-Leste are expected to post lower growth than earlier predicted. 

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This is due to weaker external conditions and demand for the region’s manufactured and commodity exports, coupled with lower agricultural output from adverse weather.

While the bank maintained Myanmar’s growth forecast, it anticipated better performance for Brunei, Indonesia and Thailand on the back of brighter domestic demand prospects. 

Inflation in South-east Asia 

The region’s inflation forecast for 2023 has been revised downwards to 4.2 per cent from April’s 4.4 per cent, but remains unchanged at 3.3 per cent for 2024.

Although easing oil and commodity prices have slowed price increases for most economies in the region, inflation remains elevated in countries like Laos, Myanmar and the Philippines because of currency depreciation and the impact of climate on food production. 

The region’s growth could be further undermined by high interest rates and weaker-than-expected recovery in China. 

Developing Asia

Looking beyond South-east Asia to developing Asia in a wider context, the bank has marginally lowered its growth forecast to 4.7 per cent from April’s 4.8 per cent for 2023, but kept it at 4.8 per cent for 2024. 

Developing Asia comprises ADB’s 46 members, stretching from Kazakhstan in Central Asia to Kiribati in the Pacific.

Prospects in the region have been “upbeat despite a weaker global outlook”, with growth boosted by China’s reopening as well as healthy consumption and investment in the broader region. Weak export trends in the region also show signs of bottoming out.

Decelerating inflation in developing Asia 

Inflation in the region will continue decelerating in 2023, said the report. 

Developing Asia’s inflation rate was cut to 3.6 per cent from 4.2 per cent in April for 2023, and revised up to 3.5 per cent from 3.3 per cent in April for 2024. 

The lowered forecast for 2023 is mainly from benign inflation in China, which is seeing projected rates of 0.7 per cent for 2023 and 2 per cent for 2024. 

Although lower energy and food prices drive the deceleration across the region, core inflation has also begun to recede. 

With subsiding inflation pressures, some central banks in the region have also begun to loosen monetary policy, providing breathing space for policymakers. 

Downside risks

“Developing Asia continues growing robustly, and inflation pressures are receding,” said ADB chief economist Albert Park. “Still, governments need to be vigilant against the many risks that the region faces.” 

These include property market weakness in China, elevated financial stability risks due to high interest rates, energy-supply disruptions from Russia’s invasion of Ukraine, food-security challenges in the face of El Nino disruptions and India’s rice-export ban.