SINGAPORE - The Asian Development Bank (ADB) has cut its 2015 and 2016 growth forecasts for Singapore and the rest of Asia, largely as a result of the slower than expected growth in China, the region's largest economy, and in the US and other developed economies.
After a slow first half, full-year 2015 growth in China is now estimated at 7.0 per cent, down from a March estimate 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, although the drop in stock prices is unlikely to have much impact on consumption, the report said.
"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.
Ongoing softness in the major industrialized economies (US, Japan, Euro Area) will see a slowdown in East Asia as a whole, with growth now at 6.2 per cent in 2015, down from 6.5 per cent forecast earlier.
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 growth this year after official figures out on Tuesday showed the economy grew at a much slower pace in the second quarter than expected. They added that the Government might narrow its forecast range for full-year growth to 2 to 3 per cent from 2 to 4 per cent currently.
ADB said Southeast Asia will see slower-than-previously forecast growth of 4.6 per cent for 2015, weighed down by lower-than-expected first half performances in Singapore, Indonesia and Thailand. In 2016, the regional economy is projected to expand 5.1 per cent, below 5.3 per cent estimated earlier.
Ongoing softness in fuel prices and subdued food costs are containing inflationary pressures in Asia for now, with inflation in the region in 2015 now forecast to be a slightly lower at 2.4 per cent, compared to the 2.6 per cent seen in March, ADB said.