ADB sees better growth for developing Asia, but cuts Indian outlook

Asia's developing nations are on track to grow faster this year and the next, the Asian Development Bank said today. The growth will be buoyed by a pick-up in world trade and Chinese expansion, it said, but flagged risks from tightening US monetary policy.

However, India's growth was seen at 7.0 per cent and 7.4 per cent for this year and next, weaker than the July forecasts of 7.4 per cent and 7.6 per cent.

Developing Asia is expected to grow by 5.9 per cent and 5.8 per cent in 2017 and 2018, respectively, the Manila-based lender said. That is unchanged from its July estimates, but higher than the 5.7 per cent forecast it gave for both years in its Asian Development Outlook (ADO) released in April.

China is expected to grow 6.7 per cent this year and 6.4 per cent next year, unchanged from the July estimates, ADB said.

''Growth prospects for developing Asia are looking up, bolstered by a revival in world trade and strong momentum in PRC (China),'' ADB chief economist Yasuyuki Sawada was quoted in a statement released after the bank updated its 2017 outlook.

Sawada said developing Asia should take advantage of favourable short-term economic prospects to invest in infrastructure, improve productivity and maintain sound economic policies to lift long-term growth.

However, the ADB trimmed its growth forecast for South Asia to 6.7 per cent this year and 7.0 per cent next year, compared with estimates of 7.0 per cent and 7.2 per cent made in July.

Southeast Asia's economy will grow 5.0 per cent this year and 5.1 per cent next year, stronger than July forecasts of 4.8 per cent and 5.0 per cent.

Still, ADB said regional policymakers need to brace for potential capital outflows and higher borrowing costs as the US Federal Reserve begins the unwinding of a decade of aggressive monetary stimulus and continues to raise interest rates.

''Because long-term interest rates in many Asian economies are closely linked to those in the US, policymakers need to strengthen their financial positions further and monitor debt levels and asset prices,'' the ADB said.

ADB said Indonesia, Malaysia, Thailand and Taiwan could benefit from a boost in accommodative policy, but intensifying inflationary pressures make the case for stimulus in the Philippines and South Korea less clear.

Inflation in the region was forecast to be slightly slower at 2.4 per cent this year and 2.9 per cent next year, compared with the 2.6 per cent and 3.0 per cent estimated in July.