MANILA (BLOOMBERG) - The Asian Development Bank (ADB) cut economic growth forecasts for developing Asia, as the emergence of the Omicron variant and rising coronavirus infections globally show the pandemic is far from over.
The region's gross domestic product will expand 7 per cent this year, down a notch from the 7.1 per cent forecast in September, the ADB said in its Asian Development Outlook Supplement released Tuesday (Dec 14).
The expansion will mark a course reversal from last year's 0.1 per cent contraction, and will moderate to 5.3 per cent next year - slower than the 5.4 per cent previously estimated. "Developing Asia is expected to sustain its strong rebound as envisaged in September," the Manila-based lender said.
Yet, the "recent emergence of the highly mutated omicron coronavirus variant is a sobering reminder that further outbreaks remain a possibility", it said.
China, the region's largest economy, is expected to grow more slowly by 8 per cent this year and 5.3 per cent next year. India's forecast is lowered to 9.7 per cent for fiscal year that began April 1, 2021. South-east Asia's outlook has also been cut to 3 per cent for this year amid expectations of slower growth in Malaysia and Vietnam.
Beijing's Covid-zero approach could severely disrupt economic activity, while new infection waves could reverse reopening in many nations, the ADB said.
Travel restrictions also damp growth prospects for tourism-dependent economies, it said. Other key points from the report: Regional inflation remains manageable, with the forecast revised down to 2.1 per cent for this year and unchanged at 2.7 per cent for next year, which will allow monetary policy to stay supportive
Still, upside risks to inflation could prompt the United States to tighten monetary policy earlier and trigger financial volatility. Most economies in developing Asia have ramped up their vaccine roll-outs, but progress still varies considerably.