The Asian Development Bank cut its forecast for gross domestic product growth in developing Asia this year as China’s Covid Zero approach to containing the virus creates ripple effects on regional supply chains and economic development.
The bank expects the region to grow 4.6 percent this year compared to an earlier forecast of 5.2 percent, according to a report published Thursday.
It slashed forecast for East Asia -including China, Hong Kong, Taiwan and South Korea -to 3.8 percent from 4.7 percent. Growth in China “will be weaker than earlier expected,” the bank said, projects GDP to expand 4 percent in 2022, down from an earlier estimate of 5 percent.
“With many economies in the region increasingly choosing to live with the virus and reopening, economic activity continued to expand in the first half of 2022 - with the notable exception” of China, the bank wrote in its report.
Economic risks to Asia are “elevated and mainly associated with external factors,” the bank said, adding that tighter monetary policies from the US Federal Reserve and other major central banks, as well as worsening fallout from Russia’s invasion of Ukraine could hurt growth. Within the region, “downside risks could arise from the potentially lingering effects on supply chains” from China’s “latest round of lockdowns and the country’s growth slowdown, which could hinder developing Asia’s growth momentum.”
China’s outlook has been clouded by Covid outbreaks and the ensuing restrictions intended to control them, along with an ongoing crisis in the property market. Economic growth slowed sharply to 0.4 percent in the second quarter, when dozens of cities including Shanghai and Changchun imposed lockdowns.
Many economists expect China will likely miss its economic growth target of about 5.5 percent this year by a significant margin.
In a speech to global business leaders hosted by the World Economic Forum this week, Chinese Premier Li Keqiang signaled a focus on jobs, along with flexibility on the growth rate.
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