Chinese workers working on a construction site at sunset in Chongqing, China.
Asia’s developing economies may be showing signs of recovery, but the Asian Development Bank (ADB) has cut its growth forecasts for them once again – thanks to China’s long-standing zero-Covid policy.
But this will be the first time in more than three decades that the rest of developing Asia will grow faster than China, the Manila-based lender said in its latest outlook report released on Wednesday.
“The last time was in 1[ads1]990, when (China’s) growth slowed to 3.9% while GDP in the rest of the region increased by 6.9%,” it said.
The ADB now expects developing Asia – excluding China – to grow by 5.3% in 2022, and China by 3.3% in the same year.
Both figures are further downgrades – in July, for example, it cut its growth forecast for China to 4% from 5%. The ADB attributed it to sporadic shutdowns from the nation’s zero-Covid policy, problems in the real estate sector and slowing economic activity in the face of weaker external demand.
It also lowered its 2023 forecast for China’s economic growth to 4.5% from April’s outlook of 4.8% on “worsening external demand that continues to dampen investment in manufacturing.”
Recovery does not help
Although the region is showing signs of continued recovery through revived tourism, global headwinds are slowing overall growth, the ADB said.
For the region, the ADB now expects emerging Asian economies to grow by 4.3% in 2022 and 4.9% in 2023 – a downward revision from July’s revised forecasts of 4.6% and 5.2%, respectively, according to the latest outlook report which was released on Wednesday.
The latest updates to the Asian Development Outlook also forecast the pace of rising prices to accelerate further to 4.5% in 2022 and 4% in 2023 – an upward revision to July’s forecasts of 4.2% and 3.5% respectively, citing increased inflationary pressure from food and energy costs.
“Regional central banks are raising their policy rates as inflation has now risen above pre-pandemic levels,” it said. “This contributes to tighter financial conditions amid weaker growth prospects and accelerated monetary tightening by the Fed.”
China the “big exception”
“China remains the major exception due to its periodic but strict lockdowns to eradicate sporadic outbreaks,” the ADB said, referring to the People’s Republic of China.
In contrast, “relaxation of pandemic restrictions, increasing immunization, falling Covid-19 mortality and the less severe health impact of the Omicron variant underpin improved mobility in much of the region,” the report added.