ADB cuts India’s FY20 GDP growth forecast to 5.1%

ADB has also cut the estimate for the next fiscal year 2020-21 to 6.5 per cent from 7.2 per cent.

“In India, growth has slowed substantially as a result of a credit crunch and weakening domestic demand," ADB stated in a website release. This is another addition to the series of downward revision of India's economic forecast for the ongoing fiscal.

“In South Asia, India’s growth is now seen at a slower 5.1 per cent in fiscal year 2019 as the foundering of a major nonbanking financial company in 2018 led to a rise in risk aversion in the financial sector and a credit crunch. Also, consumption was affected by slow job growth and rural distress aggravated by a poor harvest. Growth should pick up to 6.5 per cent in fiscal year 2020 with supportive policies. In September, ADB forecast India’s GDP to grow 6.5 per cent in 2019 and 7.2 per cent in 2020,” ADB stated.

Reserve Bank of India (RBI) in its monetary policy announcement last week revised its FY2019-20 outlook to 5 per cent from 6.1 per cent after growth rate for the second quarter slumped to a 6-year low of 4.5 per cent.

The Manila-based Asian Development Bank has trimmed its forecasts for economic growth in the whole of Asia this year and next year as growth in the People’s Republic of China (PRC) and India is weighed down by both external and domestic factors.

In a supplement to its Asian Development Outlook 2019 Update released in September, ADB now expects gross domestic product (GDP) in the region to expand 5.2 per cent in both 2019 and 2020, down from the September forecast of 5.4 per cent growth this year and 5.5 per cent next year.

“While growth rates are still solid in developing Asia, persistent trade tensions have taken a toll on the region and are still the biggest risk to the longer-term economic outlook. Domestic investment is also weakening in many countries, as business sentiment has declined,” said ADB chief economist Yasuyuki Sawada. “Inflation, on the other hand, is ticking up on the back of higher food prices, as African swine fever has raised pork prices significantly.”

The supplement forecasts inflation of 2.8 per cent in 2019 and 3.1 per cent in 2020, up from the September prediction that prices would rise 2.7 per cent this year and next.

In East Asia, growth in the PRC is now expected at 6.1 per cent this year and 5.8 per cent next year due to trade tensions and a slowdown in global activity coupled with weaker domestic demand, with family wallets being hit by pork prices that have doubled relative to a year ago. Growth could accelerate, however, should the United States and the PRC come to an agreement on trade, the report says. In September, ADB forecast GDP growth of 6.2 per cent in 2019 and 6.0 per cent in 2020.

Hong Kong, China, already in technical recession, will see severe downward pressures persist possibly into 2020. The economy is now expected to contract 1.2 per cent this year and grow 0.3 per cent next year.

In Southeast Asia, many countries are seeing continued export declines and weaker investment, and growth forecasts have been downgraded for Singapore and Thailand. GDP growth is expected to slow in the Pacific with activity in Fiji, the subregion’s second largest economy after Papua New Guinea, expected to be more subdued than previously anticipated.

Central Asia is the only subregion where prospects look a little brighter now than in September, largely thanks to increased public spending in Kazakhstan, the region’s largest economy. Central Asia is now forecast to grow 4.6 per cent in 2019, up from the previous prediction for expansion of 4.4 per cent.  The forecast for 2020 is for growth of 4.5 per cent. Kazakhstan’s economy is seen expanding by 4.1 per cent this year and 3.8 per cent next year.