Emerging economies in the Asia-Pacific region are losing steam, which has prompted the Asian Development Bank to sharply cut its growth forecast. The bank calls for more financial stability and reforms.
Gross domestic product (GDP) in the Asia Pacific region this year was expected to slow to 6 percent, down from an earlier prediction of 6.6 percent, the Asian Development Bank (ABD) said in a revision of its annual Asian Development Outlook report published in April.
Economic growth in 2014 was expected to rise marginally to 6.2 percent, the bank said, which was still 0.5 percent lower than its April forecast.
The revision came as output in the regions two most important economic powerhouses, China and India, were expanding at a slower pace.
ADB forecast Chinese economic expansion to a moderate 7.6 percent in 2013, from 7.7 percent last year. In India, the 2013 GDP would be 0.3 percent lower than in 2012 at a projected 4.7 percent.
While in China the slower expansion was the result of a government policy to enter a more sustainable path of development, India’s economy was held back by poor infrastructure and a lack of structural reforms, ADB said.
Moreover, uncertainty over the US Federal Reserve’s stimulus program was hurting investments in the two countries, as well as the region as a whole.
Therefore, growth forecasts for East Asia, South Asia, South-East Asia and Central Asia were also revised downward by the bank.
“Current conditions highlight the need for the region to exercise vigilance to safeguard financial stability in the short term, while accelerating structural reforms to sustain economic growth in the longer term,” ADB Chief Economist Changyong Rhee said in a statement.
Noting that he expected economic activity to edge up in 2014, he said that countries in the region were much stronger than during the Asian financial crisis in the late 1990s because they had much higher currency reserves.