Growth in developing Asia will likely be slower this year than previously thought, the Asian Development Bank said on Wednesday, as the war in Ukraine is expected to derail economic recovery in a region still reeling from the Covid-19 pandemic.
The bloc’s combined economy, which includes China and India, is projected to expand 5.2% this year, the ADB said in a report, down slightly from 5.3% forecast in December, and sharply lower than the previous year’s 6.9% growth.
For 2023, the region is forecast to grow 5.3%.
“The Russian invasion of Ukraine has severely disrupted the outlook for developing Asia which is still contending with Covid-19,” the ADB said in its Asian Development Outlook report.
The Manila-based lender said other factors could also cloud the region’s growth outlook, including increases in commodity prices, heightened financial stability risks from aggressive interest rate rises in the US, and the emergence of deadlier Covid-19 variants.
China’s economy will probably grow 5% this year, the agency said, slower than its December projection, and much weaker than its 8.1% expansion in 2021, as coronavirus outbreaks disrupt economic activities and chill consumer spending.
Except for South Asia, all sub-regions were expected to post slower-than-expected growth this year.
The ADB now sees East Asia and Southeast Asia growing 4.7% and 4.9%, respectively, instead of 5.0% and 5.1%.
With the sharper-than-expected increases in commodity prices, the ADB raised its inflation forecast for the region to 3.7% in 2022 from its earlier forecast of 2.7%, before easing to 3.1% in 2023.
- Reuters, with additional editing by George Russell