ADB slashes Asia growth forecast as fuel, food prices rise

A man walks past the Asian Development Bank (ADB) building in Ortigas City, Philippines on October 8, 2021. (Reuters/File)
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Updated 21 July 2022
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ADB slashes Asia growth forecast as fuel, food prices rise

  • Double-digit inflation has hit most of the Caucasus and Central Asia including Pakistan
  • The growth forecast for East Asia, which includes China, was cut to 3.8 percent from 4.7 percent

MANILA: The Asian Development Bank on Thursday slashed its 2022 growth forecast for developing Asia and warned economic conditions could worsen, as the war in Ukraine and supply chain disruptions drive up prices.

While the impact of Covid-19 had eased, the region was now grappling with the fallout from Russia’s invasion of Ukraine, lockdowns in China and aggressive interest rate hikes, the Philippines-based bank said.

To reflect the deterioration across developing Asia — which stretches from the Cook Islands in the Pacific to Kazakhstan in Central Asia — the bank cut its 2022 growth forecast to 4.6 percent.

That compares with its previous prediction in April of 5.2 percent and the 6.9 percent growth chalked up last year.

It also increased its inflation forecast for the region this year to 4.2 percent, from 3.7 percent, due to surging food and fuel prices.

Risks to the outlook “remain elevated,” the bank warned.

“A substantial slowdown in global growth could hurt exports, manufacturing activity and employment prospects, and cause turbulence in financial markets,” it said.

Double-digit inflation has hit most of the Caucasus and Central Asia — which have close trade and financial ties to Russia — as well as Mongolia, Pakistan, Sri Lanka, Laos and Myanmar.

India’s inflation was above target at seven percent, but in the rest of the region’s large economies it was “manageable.”

But the bank warned: “A worsening fallout from the war in Ukraine could lead to a further surge in global energy and commodity prices, with likely knock-on effects on growth and inflation in developing Asia.”

Adding to the region’s woes was the strengthening US dollar, seen as a safe haven during periods of uncertainty, which the bank said was weighing on regional currencies and stock markets.

“With financial conditions tightening, growth in advanced economies is softening,” the bank said.

“And with activity in the PRC (China) hampered by supply chain disruptions, domestic demand and exports in developing Asia are set to face significant challenges.”

The growth forecast for East Asia, which includes China, was cut to 3.8 percent from 4.7 percent, as Covid-19 lockdowns batter the world’s second-biggest economy.

In South Asia, where bankrupt Sri Lanka is reeling from its worst economic crisis, the bank lowered its growth forecast to 6.5 percent from 7.0 percent previously.

But the bank revised up its forecast for the Pacific to 4.7 percent, from 3.9 percent, on a surprising rebound in tourism in Fiji.


Starvation fears as flood toll passes 900 in Indonesia

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Starvation fears as flood toll passes 900 in Indonesia

  • More than 1,790 people have been killed in natural disasters unfolding across Southeast Asia over the past week
  • Floods have swept away roads, smothered houses in silt, and cut off supplies in Indonesia's provinces of Aceh and North Sumatra

More than 1,790 people have been killed in natural disasters unfolding across Southeast Asia over the past week

Floods have swept away roads, smothered houses in silt, and cut off supplies in Indonesia's provinces of Aceh and North Sumatra

BANDA ACEH, Indonesia: Ruinous floods and landslides have killed more than 900 people on Indonesia’s island of Sumatra, the country’s disaster management agency said Saturday, with fears that starvation could send the toll even higher.
A chain of tropical storms and monsoonal rains has pummelled Southeast and South Asia, triggering landslides and flash floods from the Sumatran rainforest to the highland plantations of Sri Lanka.
More than 1,790 people have been killed in natural disasters unfolding across Indonesia, Sri Lanka, Malaysia, Thailand and Vietnam over the past week.
In Indonesia’s provinces of Aceh and North Sumatra, floods have swept away roads, smothered houses in silt, and cut off supplies.
Aceh governor Muzakir Manaf said response teams were still searching for bodies in “waist-deep” mud.
However, starvation was one of the gravest threats now hanging over remote and inaccessible villages.
“Many people need basic necessities. Many areas remain untouched in the remote areas of Aceh,” he told reporters.
“People are not dying from the flood, but from starvation. That’s how it is.”
Entire villages had been washed away in the rainforest-cloaked Aceh Tamiang region, Muzakir said.
“The Aceh Tamiang region is completely destroyed, from the top to the bottom, down to the roads and down to the sea.
“Many villages and sub-districts are now just names,” he said.
Aceh Tamiang flood victim Fachrul Rozi said he had spent the past week crammed into an old shop building with others who had fled the rising waters.
“We ate whatever was available, helping each other with the little supplies each resident had brought,” he told AFP.
“We slept crammed together.”
Aceh resident Munawar Liza Zainal said he felt “betrayed” by the Indonesian government, which has so far shrugged off pressure to declare a national disaster.
“This is an extraordinary disaster that must be faced with extraordinary measures,” he told AFP, echoing frustrations voiced by other flood victims.
“If national disaster status is only declared later, what’s the point?“
Declaring a national disaster would free up resources and help government agencies coordinate their response.
Analysts have suggested Indonesia could be reluctant to declare a disaster — and seek additional foreign aid — because it would show it was not up to the task.
Indonesia’s government this week insisted it could handle the fallout.

Climate calamity

The scale of devastation has only just become clear in other parts of Sumatra as engorged rivers shrink and floodwaters recede.
AFP photos showed muddy villagers salvaging silt-encrusted furniture from flooded houses in Aek Ngadol, North Sumatra.
Humanitarian groups worry that the scale of the calamity could be unprecedented, even for a nation prone to natural disasters.
Indonesia’s death toll rose to 908 on Saturday, according to the disaster management agency, with 410 people missing.
Sri Lanka’s death toll jumped on Friday to 607, as the government warned that fresh rains raised the risk of new landslides.
Thailand has reported 276 deaths and Malaysia two, while at least two people were killed in Vietnam after heavy rains triggered a series of landslides.
Seasonal monsoon rains are a feature of life in Southeast Asia, flooding rice fields and nourishing the growth of other key crops.
However, climate change is making the phenomenon more erratic, unpredictable and deadly throughout the region.
Environmentalists and Indonesia’s government have also suggested that logging and deforestation exacerbated landslides and flooding in Sumatra.