THE growth of developing Asian economies is expected to firm to 4.8% this year, outperforming many regions with inflation “contained” and “relatively low,” the Asian Development Bank (ADB) said.
“The economic growth of developing Asia in 2022 was 4.2%, down from 7.2% in 2021. This year, the ADB predicts it at around 4.8%. Growth went down from two years ago, but compared to other parts of the world, the growth rate is relatively high and inflation rate is contained and relatively low,” ADB President Masatsugu Asakawa said in a livestreamed briefing on Thursday.
The ADB maintained its 6% growth forecast for the Philippines this year, on the lower end of the government’s 6-7% target.
“I would say that developing Asia has been growing at a very robust and steady pace, although we have to bear in mind a couple of risks involved,” he added.
Mr. Asakawa said that high inflation in advanced economies like the US and Europe have forced institutions there to raise borrowing costs.
“The Federal Reserve has started to slow the pace of interest rate hikes, but it’s not clear yet if those advanced economies will end up with a successful soft-landing scenario or falling into a recession due to inflationary pressures,” he added.
The Fed raised its funds rate by 475 bps since March 2022, bringing the policy rate to 4.75-5%.
This has also caused central banks in Asia to raise rates to keep in step with the Fed, which will threaten growth momentum, Mr. Asakawa said.
The Bangko Sentral ng Pilipinas has raised borrowing costs by 425 basis points (bps) since May, bringing the key policy rate to 6.25%.
On the other hand, Mr. Asakawa said that the reopening of China will also help drive growth in the region.
“This is good news for commodity exporting countries and also countries with close ties with China in terms of the supply chain network and tourism,” he said.
However, he noted that a stronger-than-expected Chinese recovery also poses risks in the form of inflation, via stronger demand for commodities.
Meanwhile, Mr. Asakawa also noted how the climate crisis could impede growth.
“This region is one of the most vulnerable against natural disasters. Our fight against climate change will be won or lost in this region,” he said.
The ADB increased its target for cumulative climate financing to $100 billion from $80 billion from 2019 to 2030.
He said that the bank is working on another climate financing instrument, the Innovative Finance Facility for Climate in Asia and Pacific.
“It’s an instrument to increase ADB’s climate financing by utilizing a guarantee mechanism which means if ever a borrowing country fails to repay its debt to the ADB, donor countries as a guarantor will pay the ADB on its behalf,” he said.
“We also declare to be a climate bank for the Asia and the Pacific,” he added. — Luisa Maria Jacinta C. Jocson