Asian Development Outlook 2015 Supplement

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 from those published in Asian Development Outlook 2015. This Supplement envisages aggregate growth in the region at 6.1% in 2015 and 6.2% in 2016.
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The Asian region in its whole is now projected to grow at 6.1% in 2015 and 6.2% in 2016, downgrades of 0.2 and 0.1 percentage points from ADO 2015 forecasts. Growth projections are revised down for East and Southeast Asia for both years. In Central Asia and the Pacific, forecasts are unchanged for 2015, but for 2016 slightly downgraded for Central Asia and upgraded for the Pacific, and for South Asia upgraded for 2015 and retained for 2016.

Lower global commodity prices and recession in the Russian Federation have dampened economic performance in Central Asia. Growth in the region’s energy exporters — Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan — is dragged down by low oil and gas prices and consequently lower export revenues. The energy importers — the Kyrgyz Republic and Tajikistan — face, along with Uzbekistan, domestic consumption weakened by lower remittances. Growth factors are mixed. While agriculture, mining, and services performed well in the first quarter of 2015, as did construction associated with public investment programs, trade and export-oriented manufacturing remain stymied by weak external demand. The aggregate growth projection for Central Asia is maintained as projected in ADO 2015 at 3.5% for 2015 but revised slightly down for 2016 to 4.2% from 4.5%. Revised projections for 2016 reflect unexpectedly weak performance in the subregion’s energy exporters and, given the prolonged recession in the Russian Federation, low external demand.

Kazakhstan, Central Asia’s largest economy, posted 2.2% growth in the first quarter of 2015. Despite low hydrocarbon prices and spillover from recession in the Russian Federation, unemployment and domestic consumption have remained stable thanks to mild growth in agriculture and construction, coupled with a modest 3.9% increase in fixed capital investments and the rollout of government programs. In the first quarter of 2015, the trade deficit deteriorated to 2.0% of GDP, reflecting a significant 5 percentage point decline in merchandise exports. The ADO 2015 growth forecast of 1.9% for Kazakhstan in 2015 is maintained in light of low global commodity prices, ongoing recession in the Russian Federation, and weak business performance. A slower recovery prompts a downward revision of the 2016 growth forecast from 3.8% to 3.2%.

Highlights

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 from those published in Asian Development Outlook 2015. This Supplement envisages aggregate growth in the region at 6.1% in 2015 and 6.2% in 2016.

As growth in the People’s Republic of China was slower than expected in the first half of the year, projections for the region’s largest economy are revised down to 7.0% in 2015 and 6.8% in 2016. The weaker external environment means East Asia as a whole is now expected to grow by a slower 6.2% in both 2015 and 2016.

India’s growth forecasts remain at 7.8% for this fiscal year and 8.2% for next, supported by a healthy monsoon and new investment — and assuming concrete progress on reform. South Asia will grow by 7.3% in 2015, as a strong outturn in Bangladesh outweighs a disaster-induced slowdown in Nepal, and by 7.6% in 2016.

The growth outlook in Southeast Asia is trimmed to 4.6% in 2015 because outcomes in the first half of the year in Indonesia, Singapore, and Thailand disappointed expectations. Subregional growth will likely accelerate next year to 5.1%.

Low international food and fuel prices are containing inflation this year. Developing Asia’s inflation forecast is revised down slightly to 2.4% in 2015 but retained at 3.0% in 2016.