ASIAN Development Bank (ADB) lowered its 2016 growth forecast for developing Asia yesterday, citing the slowing U.S. economy and near-term shocks from Britain’s decision to leave the European Union.

    Developing Asia, which groups 45 countries in the Asia Pacific region, is now expected to expand 5.6 percent this year, slightly weaker than a March forecast of 5.7 percent, the ADB said in a supplement to its Asian Development Outlook 2016.

    The shock British vote in June to secede from the EU has chilled already tepid growth in the euro area and has shaken global financial markets.

    The Manila-based multi-lateral lending agency kept its 2017 growth estimate for the region at 5.7 percent, however.

    “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 ADB chief economist Shang-Jin Wei.

    “However, 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.”

    ADB believes China is still on track to grow 6.5 percent this year and 6.3 percent in 2017, with government plans to cut excess industrial capacity in the world’s second-largest economy expected to weigh on growth next year.

    China’s economy expanded slightly faster than expected in the second quarter but private investment growth shrank to a record low, suggesting future weakness which could pressure the government to roll out more support measures.

    For East Asia as a whole, growth forecasts are unchanged at 5.7 percent in 2016 and 5.6 percent in 2017 despite muted activity in South Korea, the report said.

    But growth this year and next will be led by South Asia, which is expected to be the fastest growing sub-region, with India likely to meet projected growth target of 7.4 percent this year and 7.8 percent next year, supported by brisk consumer spending and growth in the rural economy, ADB said.

    In Southeast Asia, growth projections for 2016 and 2017 remain unchanged at 4.5 percent and 4.8 percent. Solid performance of most economies in the sub-region for the first half of this year was driven by private consumption, except for Vietnam where a worsening drought caused a contraction in the agricultural sector.

    In Central Asia, 2016 growth forecast was trimmed to 1.7 percent from 2.1 percent, and for 2017 it was cut to 2.7 percent from 2.8 percent due to a slump in revenues from hydrocarbon exports of Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan and the recession in Russia.

    Growth this year in the Pacific is expected to slow to 3.9 percent from 7.1 percent in 2015, with the Fijian economy reeling from Cycline Winston. But stronger-than-expected tourism receipts are boosting the economies of Cook Islands and Samoa while post-cyclone reconstruction is helping Vanuatu’s economy.

    (SD-Agencies)