Asian Development Bank cuts regional forecast on China, India softness, weak

“Continuing steps to build liquid, well-developed domestic financial markets can help reduce the corporate sector’s reliance on foreign currency borrowings”, it said.

The Manila-based lender also cut its growth estimate for East Asia to 6.0 percent for this year and next, from its earlier forecast of 6.2 for both years, with China expected to miss its growth target of around 7 percent this year. Indonesian economic growth 2015 is forecast down from 5.5% to 4.9%, while GDP growth was projected down from 6% to 5.4%.

The Philippine economy is poised for its slowest growth in four years this year before recovering in 2016, the Asian Development Bank (ADB) said Tuesday.

Wei said that robust retail sales, energy and consumer confidence data for the last two months “suggest that the talk about the collapse of China’s growth rate is likely to be overblown”.

Bangladesh, home to the world’s second largest garment industry, is able to produce textiles at a third of the cost in China, according to its central bank.

Wei added that stocks volatility was unlikely to have a long-lasting effect on growth.

Southeast Asia’s growth will be at 4.4 per cent this year, same as last year and down from its July forecast of 4.6 per cent, before accelerating to 4.9 per cent next year, the ADB said. Its slowdown is rippling across the region with the ADB cutting growth forecasts for developing Asian economies for this year and next.

Despite a dimmer economic outlook, Asia remains the largest contributor to the global economy, accounting for about 60% of global growth, the ADB said.

China’s growth is forecast to ease to 6.8% in 2015 and 6.7% in 2016, from 7.3% in 2014, due to slowing investment and weakening exports, the report said.

Net capital outflows from developing Asian markets which gained pace in the first part of 2015, exceeding 125 billion dollars in the first quarter, remain a concern as investors anticipated a near term U.S. interest rate hike.

One of the most drastic revisions given was to the Indonesian economy. By contrast, in Laos, companies hold more foreign currency assets than liabilities.

“To counter the impacts of a United States rate rise, monetary policy authorities in developing Asia will need to find a balance between stabilizing the financial sector and stimulating domestic demand”, ADB says.