Pakistan, China on right-track to meet growth targets: ADB

Pakistan and China are on the right track to meet their growth targets, said Chinese media, quoting annual report of a new Asia Development Bank (ADB).

In Pakistan, further improvements in energy supply, higher infrastructure investments and an improved security environment will help push up growth in 2016 and 2017, the report says, while the economy of Bangladesh will remain robust on the strength of its garments sector.

China is “on track to meet earlier growth projections” of 6.5 per cent for 2016 and 6.3 per cent for 2017 despite weak global prospects.

In East Asia, growth forecasts are unchanged at 5.7 per cent in 2016 and 5.6 per cent in 2017, with China, the world’s second largest economy, on track to meet projected growth of 6.5 per cent in 2016 and 6.3 per cent in 2017, the Manila-based bank said in a statement.

To support its targets, it said the Chinese government is expected to continue using fiscal and monetary stimulus measures.

The statement also said that growth in Asia and the Pacific’s developing economies for 2016 and 2017 “will remain solid as firm performances from South Asia, East Asia and Southeast Asia help offset softness from the US economy, and near-term market shocks from the Brexit vote”.

In a supplement to its Asian Development Outlook 2016 report, released last March, ADB now forecasts 2016 growth for the developing economies at 5.6 per cent, below its previous projection of 5.7 per cent. For 2017, growth is seen unchanged at 5.7 per cent.

“Although the Brexit vote has affected developing Asia’s currency and stock markets, its impact on the real economy in the short term is expected to be small,” said Shang-Jin Wei, ADB’s chief economist.

However, he added “in light of the tepid growth prospects in the major industrial economies, policy makers should remain vigilant and be prepared to respond to external shocks to ensure growth in the region remains robust.”

Growth in 2016 and 2017, the report notes, is led by South Asia, and India in particular, which continues to expand strongly, while China is on track to meet earlier growth projections.

The report says South Asia is expected to be the fastest growing sub-region, led by India, whose economy has shrugged off global headwinds and is on track to meet ADB’s projected growth target for of 7.4 per cent, supported by brisk consumer spending and an uptick in the rural economy.

In Southeast Asia, the report says growth forecasts for the sub-region in 2016 and 2017 remain unchanged at 4.5 per cent and 4.8 per cent, with solid performances by most economies in the first half of 2016 driven by private consumption.

“The exception was Vietnam where the economy came under pressure from a worsening drought that caused a contraction in the agriculture sector,” it says.

It also says that continued soft commodity prices and the recession in (Russia) have further dampened the growth outlook for Central Asia, with the earlier 2016 forecast of 2.1 per cent trimmed to 1.7 per cent, and 2017 cut to 2.7 per cent from 2.8 per cent.

“The slump in revenues from hydrocarbon exports are affecting fiscal consolidation efforts in Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan, while lower remittances, particularly from the Russian Federation, continue to hurt domestic consumption in the subregion,” it says.

In the Pacific, the report says growth for 2016 is expected to moderate to 3.9 per cent in 2016 from 7.1 per cent in 2015, with the Fijian economy reeling from Cyclone Winston.

“However there are some bright spots with stronger-than-expected tourism receipts aiding the Cook Islands and Samoa, while Vanuatu’s economy is being boosted by the rollout of post-cyclone reconstruction work and other major infrastructure projects,” it says.

The report now projects inflation for developing Asia to come in at 2.8 per cent for 2016 and 3 per cent for 2017 – a 0.3 percentage point rise for each year from the previous forecasts.

“The rise is due largely to a recovery in oil and food prices. Oil prices rebounded from early-year lows and food prices rose nearly 9 per cent in June 2016 from the year earlier, marking the fifth consecutive month the index has risen in value,” the report says.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.

Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members – 48 from the region. In 2015, ADB assistance totaled $27.2 billion, including co-financing of $10.7 billion.