Headwinds from the escalating trade war between the U.S. and China have yet to slow down growth in Asia’s developing economies.
A new report by the Asian Development Bank said developing Asia — 45 of the ADB’s 67 members — would grow at 6% this year and 5.8% in 2019, unchanged from forecasts in September. The regional lender said the 90-day truce on new tariffs between the world’s two largest economies would allow business to front-load trade.
“Nonetheless, the threat looms on the horizon, given significant policy differences still to be reconciled,” the ADB said.
Growth in China, the region’s largest economy, is still expected to slow to 6.3% this year and next, as the trade tensions have dampened consumer confidence and led to a decline in retail sales growth. A continuing crackdown on shadow banking, restrictions on the housing market and a sharp decline in infrastructure investment have contributed to the slowdown.
India is on track to become the region’s fastest growing economy next year, the ADB said. Falling oil prices and the depreciation of the rupee could boost exports, offsetting risks such as the trade war, limited infrastructure funding and liquidity stress in the country’s nonbank lenders.
The ADB cut its projection for Southeast Asia next year to 5.1% from 5.2% in September amid downward revisions in Indonesia, Malaysia and Thailand. Consumer spending, the lender said, is driving Southeast Asia’s expansion.
“Moderation in global demand for exports is, however, dampening growth prospects for the subregion,” it said.