Asia's growth to be steady in 2016 and 2017: ADB

MANILA • The Asian Development Bank (ADB) kept its growth estimates for developing Asia for this year and next at 5.7 per cent, saying sustained expansion in China and India can steady the region, but warned of risks from a looming United States interest rate hike.

The lender increased its growth forecast this year for China to 6.6 per cent from 6.5 per cent, and for next year to 6.4 per cent from 6.3 per cent, citing fiscal and monetary stimulus measures in the world's second-largest economy.

The projections for India were kept at 7.4 per cent for this year and 7.8 per cent for next year, driven by strong consumption and an investment revival, the ADB said in an update yesterday of its Asian Development Outlook released in March.

"Strong growth in China and India is helping the region maintain its growth momentum," said Mr Zhuang Juzhong, ADB deputy chief economist. "Still, policymakers need to watch for downside risks, including potential capital reversals that could be triggered by monetary policy changes in advanced economies, especially the US," he said.

For South-east Asia, the outlook was at 4.5 per cent for this year, supported by first-half strength in the Philippine and Thai economies, ADB said.

But it cut the 2017 forecast for the region to 4.6 per cent from its March outlook of 4.8 per cent.

The possibility of a US interest rate hike could disrupt capital flows and complicate macroeconomic management in the region, the bank said.

"Private debt is on the rise in many Asian economies, which could become unsustainable if economies struggle or interest rates rise sharply," ADB said.

The US Federal Reserve left interest rates unchanged last week but strongly signalled it could still tighten monetary policy by the end of the year if the labour market keeps improving.

The Fed has two more meetings this year.

It last raised interest rates in December last year at 0.25 per cent to 0.5 per cent, its first increase in nearly a decade.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 28, 2016, with the headline 'Asia's growth to be steady in 2016 and 2017: ADB'. Print Edition | Subscribe