The Asian Development Bank (ADB) has cut its growth forecasts for this year and next for Singapore and the rest of Asia, largely because of slower-than-expected growth in China, the United States and other developed economies.
Developing Asia as a whole is now expected to grow 6.1 per cent this year and 6.2 per cent next year, the ADB said.
It had previously predicted 6.3 per cent for each year.
"Slower growth in China is likely to have a noticeable effect on the rest of Asia, given its size and its close links with other countries in the region through regional and global value chains," said ADB chief economist Shang-Jin Wei.
"As weaker-than-expected external demand, a declining working-age population and rising wages have contributed to a slower rate of growth in China, reforms aimed at improving labour market flexibility and capital allocation to the most productive firms are needed as they can also help to raise the growth rate."
Ongoing softness in the major industrialised economies (the US, Japan, the euro zone) will see a slowdown in East Asia as a whole, with growth now forecast at 6.2 per cent this year, down from 6.5 per cent, the ADB said.
It said South-east Asia will see slower growth than the previously forecast 4.6 per cent for this year, weighed down by lower-than-expected first-half performances in Singapore, Indonesia and Thailand. Next year, the regional economy is projected to expand 5.1 per cent.
Singapore's economy is forecast to grow 2.8 per cent this year, down from the March estimate of 3 per cent. The ADB maintained its prediction for 2016 growth at 3.4 per cent.
Some private economists cut their forecasts for Singapore this year after official figures out on Tuesday showed that the economy grew at a much slower pace in the second quarter than expected. They said the Government might narrow its forecast range for full-year growth to 2 to 3 per cent from 2 to 4 per cent currently.
China's full-year growth, after a slow first half, is now estimated at 7 per cent, down from a March figure of 7.2 per cent, and will ease further to 6.8 per cent next year.
Consumption growth in the country remains robust but investment growth has continued to decelerate. The financial sector is also expected to contribute less to growth after the recent stock market correction, the report said.
Ongoing softness in fuel prices and subdued food costs are containing inflationary pressures in Asia for now, with inflation in the region this year now forecast to be slightly lower at 2.4 per cent.
REUTERS, AGENCE FRANCE-PRESSE
