Trade war, Brexit could slow developing Asia’s 2019 and 2020 growth: ADB

China’s economy will probably grow 6.3 percent this year, the Asian Development Bank said. (AP)
Updated 03 April 2019

Trade war, Brexit could slow developing Asia’s 2019 and 2020 growth: ADB

  • Developing Asia, which groups 45 countries in the Asia-Pacific region, is expected to grow 5.7 this year
  • The 2019 forecast represents a slight downgrade from ADB’s December forecast of 5.8 percent

MANILA: Growth in developing Asia could slow for a second straight year in 2019 and lose further momentum in 2020, the Asian Development Bank (ADB) said on Wednesday, warning of rising economic risks from a bitter Sino-US trade war and a potentially disorderly Brexit.
Developing Asia, which groups 45 countries in the Asia-Pacific region, is expected to grow 5.7 this year, the ADB said in its Asian Development Outlook report, slowing from a projected 5.9 percent expansion in 2018 and 6.2 percent growth in 2017.
The 2019 forecast represents a slight downgrade from its December forecast of 5.8 percent. For 2020, the region is forecast to grow 5.6 percent, which would be the slowest since 2001.
“A drawn out or deteriorating trade conflict between the People’s Republic of China and the United States could undermine investment and growth in developing Asia,” Yasuyuki Sawada, ADB’s chief economist, said in a statement.
The lender also cited uncertainties stemming from US fiscal policy and a possible disorderly Brexit as risks to its outlook because they could slow growth in advanced economies and cloud the outlook for the world’s second largest economy.
“Though abrupt increases in US interest rates appear to have ceased for the time being, policy makers must remain vigilant in these uncertain times,” Sawada said.
China’s economy will probably grow 6.3 percent this year, the ADB said, unchanged from its December projection, but slower than the country’s 6.6 percent expansion in 2018 despite recent government stimulus measures including more tax cuts and increased state spending on infrastructure.
Growth in the Chinese mainland is projected to cool further to 6.1 percent in 2020.
Beyond trade risks, the ADB said China’s growth will also be retrained by restrictions on shadow banking, which is expected to limit credit expansion even as fiscal stimulus provides some offset.
“I should emphasize although the government would like to stabilize growth, it wouldn’t want to push up the growth rate as in previous years when you saw a big stimulus package, like in the period of 2008-2009,” said Jian Zhuang, senior economist at ADB in Beijing.
Chinese banks may still remain reluctant to lower lending costs for companies partly on worries of rising risks of corporate defaults in a slowing economy. The central bank could take further actions, such as cutting the benchmark 1-year lending and deposit rates, the ADB said.
China has set its 2019 economic growth target at 6.0 to 6.5 percent.
By region, South Asia will remain the fastest growing in Asia Pacific, with the ADB predicting an expansion of 6.8 percent this year — lower than its previous forecast of 7.1 percent — and 6.9 percent next year.
From an estimated 7.0 percent growth in 2018, India’s economy is projected to expand at a faster pace of 7.2 percent in 2019 and 7.3 percent in 2020, the ADB said, as lower policy rates and income support to farmers boost domestic demand.
This year’s growth forecast for Southeast Asia was trimmed to 4.9 percent from an earlier estimate of 5.1 percent, as the Manila-based lender expect Malaysia, Singapore, Philippines and Thailand to grow slower than previously thought.
Next year, Southeast Asia is predicted to grow 5.0 percent.
Citing stable commodity prices, the ADB lowered its average inflation forecast for developing Asia to 2.5 percent this year from 2.7 percent previously, and it is expected to remain subdued at 2.5 percent in 2020.


China economy grows in 2020 as rebound from coronavirus gains

Updated 18 January 2021

China economy grows in 2020 as rebound from coronavirus gains

  • Growth in the three months ending in December rose to 6.5 percent over a year earlier
  • China’s quick recovery brought it closer to matching the US in economic output

BEIJING: China eked out 2.3 percent economic growth in 2020, likely becoming the only major economy to expand as shops and factories reopened relatively early from a shutdown to fight the coronavirus while the United States, Japan and Europe struggled with rising infections.
Growth in the three months ending in December rose to 6.5 percent over a year earlier as consumers returned to shopping malls, restaurants and cinemas, official data showed Monday. That was up from the previous quarter’s 4.9 percent and stronger than many forecasters expected.
In early 2020, activity contracted by 6.8 percent in the first quarter as the ruling Communist Party took the then-unprecedented step of shutting down most of its economy to fight the virus. The following quarter, China became the first major country to grow again with a 3.2 percent expansion after the party declared victory over the virus in March and allowed factories, shops and offices to reopen.
Restaurants are filling up while cinemas and retailers struggle to lure customers back. Crowds are thin at shopping malls, where guards check visitors for signs of the disease’s tell-tale fever.
Domestic tourism is reviving, though authorities have urged the public to stay home during the Lunar New Year holiday in February, normally the busiest travel season, in response to a spate of new infections in some Chinese cities.
Exports have been boosted by demand for Chinese-made masks and other medical goods.
The growing momentum “reflected improving private consumption expenditure as well as buoyant net exports,” said Rajiv Biswas of IHS Markit in a report. He said China is likely to be the only major economy to grow in 2020 while developed countries and most major emerging markets were in recession.
The economy “recovered steadily” and “living standards were ensured forcefully,” the National Bureau of Statistics said in a statement. It said the ruling party’s development goals were “accomplished better than expectation” but gave no details.
2020 was China’s weakest growth in decades and below 1990’s 3.9 percent following the crackdown on the Tiananmen Square pro-democracy movement, which led to China’s international isolation.
Despite growth for the year, “it is too early to conclude that this is a full recovery,” said Iris Pang of ING in a report. “External demand has not yet fully recovered. This is a big hurdle.”
Exporters and high-tech manufacturers face uncertainty about how President-elect Joseph Biden will handle conflicts with Beijing over trade, technology and security. His predecessor, Donald Trump, hurt exporters by hiking tariffs on Chinese goods and manufacturers including telecom equipment giant Huawei by imposing curbs on access to US components and technology.
“We expect the newly elected US government will continue most of the current policies on China, at least for the first quarter,” Pang said.
The International Monetary Fund and private sector forecasters expect economic growth to rise further this year to above 8 percent.
China’s quick recovery brought it closer to matching the United States in economic output.
Total activity in 2020 was 102 trillion yuan ($15.6 trillion), according to the government. That is about 75 percent the size of the $20.8 trillion forecast by the IMF for the US economy, which is expected to shrink by 4.3 percent from 2019. The IMF estimates China will be about 90 percent of the size of the US economy by 2025, though with more than four times as many people average income will be lower.
Exports rose 3.6 percent last year despite the tariff war with Washington. Exporters took market share from foreign competitors that still faced anti-virus restrictions.
Retail spending contracted by 3.9 percent over 2019 but gained 4.6 percent in December over a year earlier as demand revived. Consumer spending recovered to above the previous year’s levels in the quarter ending in September.
Online sales of consumer goods rose 14.8 percent as millions of families who were ordered to stay home shifted to buying groceries and clothing on the Internet.
Factory output rose 2.8 percent over 2019. Activity accelerated toward the end of the year. Production rose 7.3 percent in December.
Despite travel controls imposed for some areas after new cases flared this month most of the country is unaffected.
Still, the government’s appeal to the public to avoid traditional Lunar New Year gatherings and travel might dent spending on tourism, gifts and restaurants.
Other activity might increase, however, if farms, factories and traders keep operating over the holiday, said Chaoping Zhu of JP Morgan Asset Management in a report.
“Unusually high growth rates in this quarter are likely to be seen,” said Zhu.