Bangkok Economic growth is slowing worldwide, only in Asia is the trend pointing in the opposite direction: Despite problems in the export business, the continent’s emerging countries can expect a higher growth rate this year than in 2022. This is the result of the economic forecast “Asian Development Outlook”, which the Asian Development Bank (ADB) intends to publish this Tuesday.
Accordingly, the bank’s economists expect an increase in economic output of 4.8 percent in the region for this year – compared with an increase of 4.2 percent in the previous year.
This means that Asia’s economic development is becoming increasingly different from the rest of the world: the Organization for Economic Cooperation and Development (OECD) forecast in March that the global growth rate would fall to 2.6 percent this year – 0.6 percentage points less than in the previous year .
The gap between Asia’s emerging countries and the euro zone, where the growth rate is likely to fall from 3.5 to 0.7 percent according to data from the International Monetary Fund, will be particularly large.
The continent has two countries in particular to thank for the fact that Asia’s upswing will probably continue despite the global problems: China and India. The end of the zero-Covid policy in Asia’s largest economy is the main reason for the optimism: “We expect that China’s reopening will improve growth and the regional outlook,” says ADB chief economist Albert Park. He expects China’s growth rate to increase from three percent last year to five percent this year. This also corresponds to the goal of the government in Beijing.
Chinese tourists bring hope to Thailand
The positive development in the People’s Republic is spilling over to several smaller economies: in countries such as Cambodia, the Maldives and Thailand, the Chinese made up the majority of vacationers before the start of the corona crisis. With China’s opening up, states can hope for a return to former tourism revenues.
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In Thailand, by far the most popular travel destination in the region, the ADB economists therefore expect economic growth to increase from 2.6 percent to 3.3 percent – although the export business is forecast to slow down throughout Southeast Asia given the weak demand in Asia industrialized countries is likely to slow down.
India also remains an important growth driver for the continent. According to the forecast, the country will grow the fastest of the larger economies in the region this year: With a plus of 6.4 percent, the growth rate this year should be only slightly lower than in the previous year according to the ADB. According to the bank’s economists, this is due to “healthy domestic demand” in the country with 1.4 billion inhabitants.
Regardless of weak demand abroad, India’s industry has recently developed better than the rest of the continent. While March PMIs were released on Monday in most countries, India’s reading rose to 56.4 from 55.3 – suggesting further expansion in the manufacturing sector. According to the ADB, the stable economic growth should also continue in the 2024 election year, when the bank expects an increase of 6.7 percent.
Rising oil prices are weighing on the region
However, the ADB economists also see risks for Asia’s growth. Chief economist Park was surprised by the funding cuts announced at the weekend by the OPEC plus oil network. He originally assumed an average oil price of $88 a barrel this year. The Opec-plus decision now makes it plausible that prices will rise above this threshold, says Park. “This will be another challenge for the region as energy prices continue to rise.”
The ADB also sees an intensification of the banking crisis in the USA and Europe as a possible brake on growth. However, the economists do not expect a serious setback. They have calculated a scenario that simulates the consequences of a financial crisis that is about half as severe as in 2008 and 2009.
The Asian Development Bank considers the continent’s banks to be comparatively stable.
(Photo: Moment/Getty Images)
In Asia, China would be hit the hardest – due to a further decline in foreign demand. In this scenario, the country’s growth rate would drop by around half a percentage point this year and next.
Overall, however, ADB economist Park considers the banking sector in the region to be well positioned. The banks’ equity capital is comparatively high, which reduces their vulnerability to shocks. In his view, confidence in the financial stability of the continent is also high on the capital markets. Bank stocks in Asia fell just 3 percent in March, compared to a fall of around 20 percent in the US and 11 percent in Europe.
Pakistan and Sri Lanka are in crisis
However, the overall positive economic development in Asia’s emerging countries also has exceptions: The situation in Pakistan and Sri Lanka, which are struggling with severe debt and balance of payments crises, is particularly difficult.
According to ADB forecasts, economic growth in Pakistan, a country with a population of more than 230 million, is likely to drop from six percent to almost zero. A further decline in economic output is expected in Sri Lanka, which had already collapsed in the previous year due to the national bankruptcy.
The only hope for the country at the moment is a $2.9 billion aid package from the International Monetary Fund, which could potentially help end the recession next year.
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