China's slowing economic growth is weakening momentum throughout the rest of Asia, the Asian Development Bank said today as it revised down its forecasts for the region.
A day after Beijing released data showing its economic growth slowed for a second successive month in April-June, the ADB trimmed its outlook for developing Asia this year to 6.3 per cent growth, from 6.6 per cent.
In the update to its annual Asian Development Outlook publication, first published in April, the bank also pared its 2014 forecast to 6.4 per cent, from 6.7 per cent.
"The drop in trade and scaling back of investment are part of a more balanced growth path for (China), and the knock-on effect of its slower pace is definitely a concern for the region," the bank's chief economist, Changyong Rhee, said in a statement.
"But we are also seeing more subdued activity across much of developing Asia," Rhee added.
The update for this year is only a little better than what the bank described in the report as the region's "relatively sluggish" growth of 6.1 per cent last year.
Developing Asia groups 45 nations or territories from Central Asia through to the Pacific islands, but excludes Japan.
The report cited a marginally better outlook for the advanced economies, particularly Japan where it said monetary and fiscal reforms by Prime Minister Shinzo Abe appear to be bearing fruit.
However, this did not lead to stronger demand for Asian exports, with even Southeast Asia, the bright spot in early 2013, no longer faring as well.
"Southeast Asia's strong start to the year is being tempered by slower growth in (China) and continued weak demand from advanced economies for its exports," it said.
China said yesterday its economy expanded 7.5 per cent in the second quarter, following 7.7 per cent in the previous three months and 7.9 per cent in October-December.
This "points to slow but persistent growth deceleration" amid moderating industrial production and weaker investment growth, the ADB said.
The bank now sees China's economy growing 7.7 per cent this year and 7.5 per cent in 2014, helped by consumer confidence remaining high and retail sales picking up.
But both figures are lower than its April forecasts of 8.2 per cent and 8.0 per cent. The Asian economic giant grew 7.8 per cent last year.
It said East Asia should grow 6.7 per cent this year and next, with both Hong Kong and Taiwan hit hard by the slower Chinese economy.
"In India, slowing fixed capital formation, weak industrial activity, and plodding progress on reform are weighing on the economy," it said.
The bank lowered its growth forecast for India this year to 5.8 per cent, from 6.0 per cent. The country's economy grew 5.0 per cent last year.
On a positive note, the ADB said slower GDP growth helped the region contain inflation, while expanded global natural gas production put a lid on energy prices.
The bank lowered its inflation forecasts for developing Asia to 3.5 per cent this year and 3.7 per cent in 2014, the latter on par with the 2012 rate.
