MANILA — The Asian Development Bank on Thursday cut its economic-growth forecast for developing Asia amid slower-than-expected growth in the United States and China.
The Manila-based bank said the region's gross domestic product was projected to grow by only 6.1% from the original forecast of 6.3% in its annual Asian Development Outlook published in March.
"With the United States contracting in the first quarter and some underperformance within Asia and the Pacific, growth forecasts for developing Asia are adjusted down," the supplemental report said.
The bank said the growth outlook for Southeast Asia was trimmed to 4.6% because Thailand, Indonesia, and Singapore's economies disappointed in the first half. Subregional growth will likely accelerate next year to 5.1%.
Source: Asian Development Bank
The ADB supplement lowers predictions for Thailand's GDP from 3.6% in March to 3.2%. It held 2016's forecast steady at 4.1%.
"Although the economy is on the path of recovery, expansion in private consumption has been gradual, and merchandise exports have contracted," the report said. "Weak first-quarter growth, continued deterioration in the consumer confidence index, and the contraction of merchandise exports in the first five months of 2015 help guide the revision of the GDP growth forecast for 2015 down."
Bank economists also drastically cut projections for inflation in Thailand from the early expectation of a 2% increase in prices to a deflationary rate of -0.4%. Full-year 2016 inflation prospects were cut from 2% to 1.8%.
"Headline inflation in Thailand fell by 0.8% in the first half of 2015 from a year earlier, largely as energy prices declined. The fall in prices for 6 consecutive months meets the technical definition of deflation," the report stated. "As domestic consumption is slow to recover and global oil and commodity prices remain low, deflation is projected to persist for the whole of 2015, with inflation returning in 2016."
The bank noted that Southeast Asia is the only subregion with higher 2015 and 2016 inflation projections, revised from 3.1% to 3.4% for both years, and that "upward revisions for Indonesia and Malaysia outweigh the downward revision for Thailand".
In its conclusion, the ADB said that a slower Chinese economy is affecting the entire developing Asia region.
"Slower growth in China is likely to have a noticeable effect on the rest of Asia given its size and its close links with other countries in the region through regional and global value chains," ADB chief economistShang Jin-Wei told the German Press Agency.
Full-year growth in China is now estimated at 7% in 2015, down from 7.2% previously after a slow first half. Growth would ease further to 6.8% next year, the report said.
"Consumption growth in the country remains robust but investment growth has continued to decelerate," it said. "The financial sector is also expected to contribute less to growth after the recent stock market correction, although the drop in stock prices is unlikely to have much impact on consumption."
The ongoing softness in the US and other major industrialized economies would also drag down growth in East Asia, where GDP is expected to now expand by 6.2% in 2015, down from the initial forecast of 6.5%.
The bank revised down its projection for inflation in the region to 2.4% in 2015, from an earlier estimate of 2.6% amid softness in fuel prices and subdued food costs.
"Inflation is seen at 3% in 2016, unchanged from the previous forecast," it added.