ADB forecasts developing Asia’s economy to grow 4.9% in 2024

Developing Asia’s growth this year is expected to be slightly stronger than previously forecast as healthy domestic demand in many economies offsets the property-driven slowdown in China, the Asian Development Bank (ADB) said on Thursday.

The ADB nudged up its 2024 growth forecast for developing Asia to 4.9% from 4.8% projected in December, but warned of persistent challenges such as rising geopolitical tensions, including in the Middle East, that could disrupt supply chains and reignite inflation. The Manila-based lender’s 2024 growth forecast was slightly weaker than the region’s 5.0% growth in 2023. Growth for 2025 was also forecast at 4.9%.

“Growth in developing Asia will remain robust this year, in spite of uncertainty in the external environment,” ADB Chief Economist Albert Park said in the Asian Development Outlook report.

 “The end of interest-rate hiking cycles in most economies as well as continued recovery in goods exports from an upturn in the semiconductor cycle will support growth,” Park said.

China remains a weight on the regional growth outlook as a protracted property crisis and other challenges keep the world’s No.2 economy from mounting a strong economic revival, the ADB said. ADB Principal Economist John Beirne, in a briefing ahead of the report’s release, said Wednesday’s cut by Fitch of its outlook on China’s sovereign credit rating to negative was concerning for investor sentiment.

“It can have additional problems that are already apparent in the property sector, and certainly it’s not helpful when we consider local government debts and sustainability of debt and cost of sovereign borrowing,” Beirne said.

The ADB forecast China would grow 4.8% in 2024. That is higher than its 4.5% estimate made in December, but slower than growth of 5.2% in 2023. It expects the Chinese economy to lose more steam next year, with growth seen slowing to 4.5%, “driven by the weak property market and amplified by fading domestic consumption growth after last year’s reopening”, the ADB said. The ADB forecast regional inflation would slow to 3.2% in 2024 from 3.3% in 2023, and ease further to 3.0% in 2025.

India’s GDP growth: The Asian Development Bank (ADB) upgrades India’s gross domestic product (GDP) growth forecast for fiscal year (FY) 2024 ending on 31 March 2025 from 6.7% to 7% and 7.2% in FY2025, driven by robust public and private investment and strong services sector.

The forecast is part of the latest edition of ADB’s flagship economic publication, Asian Development Outlook (ADO) April 2024, released today. The triggers for growth in FY2024 will come from higher capital expenditure on infrastructure development both by central and state governments, rise in private corporate investment, strong service sector performance and improved consumer confidence. Growth momentum will pick up in FY2025 backed by improved goods exports and an increase in manufacturing productivity and agricultural output.

“Notwithstanding global headwinds, India remains the fastest growing major economy on the strength of its strong domestic demand and supportive policies,” said ADB Country Director for India Mio Oka. “The Government of India’s efforts to boost infrastructure development while undertaking fiscal consolidation and provide an enabling business environment will help in increased manufacturing competitiveness to augment exports and drive future growth.”

A healthy rise of 17% in central government capital expenditure in FY2024 compared to the previous fiscal year together with transfers to state governments will boost infrastructure investment. A new government initiative to support urban housing for middle-income households is expected to further spur housing growth. Private corporate investment is expected to get a boost with stable interest rates. With inflation moderating to 4.6% in FY2024 and easing further to 4.5% in FY2025, monetary policy may become less restrictive, which will facilitate rapid offtake of bank credit. Demand for financial, real estate and professional services will grow while manufacturing will benefit from muted input cost pressures that will boost industry sentiment. Expectations of a normal monsoon will help boost growth of the agriculture sector.

The government’s focus on fiscal consolidation, with a targeted deficit of 5.1% of GDP for FY2024 and 4.5% for FY2025, will enable the government to reduce its gross marketing borrowing by 0.9% of GDP in FY2024 and create further room for private sector credit. India’s current account deficit will widen moderately to 1.7% of GDP on rising imports for meeting domestic demand. Foreign direct investment will be affected in the near term due to tight global financial conditions but will pick up in FY2025 with higher industry and infrastructure investment. Goods exports will also be affected by lower growth in advanced economies but pick up in FY2025 as global growth improves.