More grim news from Australia’s major export markets in Asia as economic growth is downgraded yet again.
The Asian Development Bank’s semi-annual regional update saw growth forecast for Asia, south east Asia, China and India all trimmed.
The ADB cut the region’s growth outlook to 5.8% for this year and 6% for 2016, down from its previous 6.3% forecast for both years. That compares with the region’s growth rate of 6.2% last year.
The ADB cut its forecast for China’s growth to 6.8% for 2015, down from its previous forecast of 7.2% and below 2014’s 7.3% growth rate. It expects the growth rate of the world’s second largest economy will fall to 6.7% next year.
“Despite robust consumption demand, economic activity fell short of expectations in the first eight months of the year as investment and exports underperformed," the report said.
“As external demand strengthens with the pickup in growth in the industrial countries, and as improved financial conditions support investment, downward pressure on growth will ease."
India’s forecasts were also cut to 7.4% for this year, down from a previous forecast for 7.8%.
“External demand weakness and slower-than-expected pace of enacting key reforms are holding back India’s growth acceleration,” the ADB said, but it added that it expected 2016 growth to pick up to 7.8 percent as reforms began to take hold.
“The first half of 2015 has been softer than expected across the board,” the ADB said yesterday, citing harsh winter weather and labour disputes at the US’s West Coast ports and Japan’s weak economic recovery as key impacts on growth.
"Emerging markets are facing receding capital flows and depreciating currencies – a trend that may be exacerbated by the upcoming rise in US interest rates,” it added as the US Fed adds to the pressures from its non-decision on interest rates last week.
The ADB also cut the outlook for the Southeast Asian region to 4.4% this year, the same pace as in 2014, but down from its previous forecast for 4.9%. It said it expected growth to rise to 4.9% in 2016.
"Thailand has yet to bounce back from its 2014 slump, while infrastructure investment has fallen behind schedule in Indonesia and the Philippines. Drought in several countries and floods in Myanmar, have hurt agriculture," the ADB said. "Vietnam, by contrast, is growing faster than anticipated earlier this year, powered by foreign direct investment and buoyant private consumption."
The bank added that Southeast Asia was “bearing the brunt of the slowdown in China”.
The ADB also cited a series of “one-off factors that could not be predicted” for its downward revision to China’s 2015 growth rate. These included tropical storms, that devastating explosion in the port city of Tianjin and a Victory Day public holiday to mark the 70th anniversary of Japan’s second world war surrender.
In fact economic activity in Beijing, Tianjin and nearby Hebei province, which have a combined population of 110 million and are home to some of China’s major industries, especially steel, was brought to a halt for more than a week to ensure clear skies for the Victory Day parade.
And it’s not just the ADB that has trimmed its estimate of China’s GDP growth rate.
The country’s top government-affiliated think tank lowered its GDP estimate for 2015 this week, saying the economy is unlikely to deliver the 7% annual growth target set by the government.
The Chinese Academy of Social Sciences lowered its estimate for gross domestic product growth to 6.9% from the previous 7% in its "Economic Blue Book Summer Issue: China Economic Growth Report (2015-2016)".
The revision is due to "pressure from low inflation" said Zhang Ping, an official with the think tank.
But the ADB pointed out yesterday that China is making the transition from investment-based growth to consumption-driven growth more quickly than thought. And that is faster than the ADB forecast six months ago.
