MANILA (REUTERS) - Developing Asia is on track to post its slowest annual growth in 16 years this year as it adjusts to China's rebalancing and possible spillovers from global policy uncertainty, the Asian Development Bank said.
The Manila-based lender kept at 5.7 per cent this year's growth forecast for developing Asia, which groups 45 countries in the Asia-Pacific region. That would be the region's weakest expansion since it grew 5.0 per cent in 2001.
Next year, developing Asia should again grow by 5.7 per cent, the ADB said in its 2017 Asia Development Outlook report.
"Developing Asia continues to drive the global economy even as the region adjusts to a more consumption-driven economy in China and looming global risks," said Yasuyuki Sawada, the ADB's chief economist.
Sawada said the region faces "risks from uncertain policy direction in the advanced economies, including the pace of interest rate normalisation in the United States".
"While short-term risks seem manageable, regional policymakers should remain vigilant to respond to possible spillover through capital outflows and exchange rate movements,"Sawada said.
The Federal Reserve hiked US rates a notch in mid-March, its second tightening in three months. Forecasts from Fed officials suggest a median of two more increases before year-end.
China, which is rebalancing its economy to growth led by consumption rather than exports, is expected to grow 6.5 per cent this year, the ADB said. That is better than its December forecast of 6.4 per cent, but weaker than the 6.7 per cent expansion in 2016.
Growth in China is seen slowing further to 6.2 per cent in 2018.
The ADB reduced its 2017 growth forecast for India to 7.4 per cent from 7.8 per cent and it expects growth there to pick up to 7.6 per cent in 2018.
With nearly all economies in Southeast Asia showing an upward trend, the region should expand by a faster 4.8 per cent this year and pick up to 5.0 percent next year, the ADB said.
Economies in South Asia are projected to expand by 7.0 per cent in 2017 and 7.2 per cent in 2018.
Strong consumer demand and rising global commodity prices could cause the inflation pace in developing Asia to quicken to 3.0 per cent this year and to 3.2 per cent in 2018, the ADB said.