Chinese laborers work at a construction site at sunset in Chongqing, China.
Asia’s emerging markets may be showing signs of recovery, but the Asian Development Bank (ADB) has again lowered its growth forecasts for them – thanks to China’s ongoing zero-Covid policy.
But this will be the first time in more than three decades that the rest of developing Asia will grow faster than China, the Manila-based lender said in its latest forecast report released on Wednesday.
“The last time was in 1990, when (China’s) growth slowed to 3.9% while GDP in the rest of the region grew 6.9%,” it said.
The ADB now expects developing Asia – excluding China – to grow 5.3% in 2022 and China to grow 3.3% in the same year.
Both numbers are further downgrades – in July, for example, the growth forecast for China was lowered to 4% from 5%. The ADB attributed this to sporadic lockdowns due to the country’s zero-Covid policy, problems in the property sector and a slowdown in economic activity amid weaker external demand.
It also lowered its forecast for China’s economic growth for 2023 to 4.5% from 4.8% in April as “deteriorating external demand continues to dampen investment in the manufacturing sector.”
recovery does not help
Though the region is showing signs of continued recovery from 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 downgraded outlook from July’s revised forecasts of 4.6% and 5, respectively. 2%, according to their latest forecast report published on Wednesday.
The latest updates to the Asian Development Outlook also forecast that the pace of price increases will accelerate even further to 4.5% in 2022 and 4% in 2023 – an upward revision of July’s forecasts of 4.2% and 3, respectively. 5%, citing additional inflationary pressures from food and energy costs.
“Regional central banks are raising interest rates as inflation is now above pre-pandemic levels,” it said. “This is contributing to tightening financial conditions amid a deteriorating growth outlook and accelerated monetary tightening by the Fed.”
China the “great exception”
“The PRC remains the major exception because of its intermittent but strict lockdowns to stamp out sporadic outbreaks,” the ADB said, referring to the People’s Republic of China.
In contrast, “the easing of pandemic restrictions, increased vaccination, falling death rates from Covid-19 and the less severe health impacts of the Omicron variant underpin improved mobility across much of the region,” he added in the report.