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Economy Jul 16, 2013

Worried on China, ADB cuts growth forecast for developing Asia

The Asian Development Bank (ADB) said on Tuesday it has lowered its growth forecasts for developing Asia this year and the next as a softer outlook for the world's second-biggest economy China meant subdued economic activity elsewhere in the region.

The bank lowered its growth forecast for developing Asia by 0.3 percentage points to 6.3 percent in 2013 and 6.4 percent in 2014, the Manila-based development lender said in a supplement to its Asian Development Outlook 2013 first released in April.

Reuters

Reuters

It cut its growth estimates for China by 0.5 percentage points to 7.7 percent and 7.5 percent this year and the next, with data showing investment growth slowed in May and is expected to weaken further with financial institutions becoming more averse to risk following turbulence in its domestic interbank money market.

"The drop in trade and scaling back of investment are part of a more balanced growth path for the PRC (People's Republic of China), and the knock-on effect of its slower pace is definitely a concern for the region," ADB Chief Economist Changyong Rhee said in a statement.

"We are also seeing more subdued activity across much of developing Asia," he said.

China reported on Monday that annual GDP growth slowed to 7.5 percent in April to June - the ninth quarter in the last 10 that expansion has weakened - putting pressure on Beijing to quicken reforms rather than slow them to take up the economic slack.

The ADB also lowered for the second time this year its forecast for South Asia's largest economy India to 5.8 percent from its April estimate of 6.0 percent, with growth still constrained by supply-side bottlenecks and sluggish progress in pushing through structural reforms.

Southeast Asia's growth is expected to be slightly lower than previously expected, mainly due to softer demand from China. However, the sub-region as a whole is likely to buck the regional trend of softer-than-expected price pressures largely due to 44 percent jump in subsidized oil prices in Indonesia in June.

Offering some comfort for central banks, the ADB forecast inflationary pressures would be benign due to decelerating growth in the region and on continued weakness in commodity prices due to soft global demand.

The ADB also said it expects Japan's recovery to pick up speed as the effects of "Abenomics" take root and improving corporate profits bolster household income and business environment. It forecast growth in Japan this year of 1.8 percent, against an April estimate of 1.2 percent.

Reuters

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