MANILA: The Asian Development Bank trimmed its 2022 growth forecast for developing Asia Wednesday as “increasing” price pressures after Russia’s invasion of Ukraine threaten a recovery from Omicron surges. Inflation across the vast region stretching from the Cook Islands in the Pacific to Kazakhstan in Central Asia was expected to gather pace as countries bounced back from the pandemic, and energy and food costs rose, it said.
In the wake of the Omicron-driven surge in coronavirus infections and the conflict in Ukraine, the Philippines-based lender lowered its 2022 economic growth forecast to 5.2 percent. That compares with its previous prediction in December of 5.3 percent and the 6.9 percent growth chalked up last year. While the bank was optimistic the region would continue to rebound from Covid-19, chief economist Albert Park said the recovery would be “uneven” and there were “significant downside risks”.
“What is certain is that the fallout from the war is an additional hurdle for economies in developing Asia which are still contending with the pandemic,” Park said. While the Caucasus and Central Asia would take a direct hit from the Ukraine crisis due to their close trade and financial links to Russia, the rest of the region would be affected indirectly through higher food and energy prices. “Energy bills will rise for energy importers, pushing inflation up and weighing on demand,” the bank said in its flagship Asian Development Outlook report.
Inflation was expected to reach 3.7 percent, compared with 2.5 percent in 2021, which Park noted was “still well below” other parts of the world, which he partly attributed to relatively lower consumption of wheat and fewer supply chain disruptions. But he warned that in developing Asia “price pressures are increasing and monetary authorities need to remain vigilant.” Also clouding the outlook was the US Federal Reserve, which has started to raise interest rates in a bid to rein in a surge in inflation that has threatened to derail the economic recovery. A recent solid US jobs report increased expectations of an aggressive rate hike. The Asian Development Bank warned that could ignite “financial market volatility, rapid capital outflows and sharp currency depreciations”.
COVID-19 still casts a shadow over developing Asia, with the risk of more deadly variants emerging and the Omicron outbreak in China threatening regional growth and supply chains, the bank said. Countries in the Caucasus and Central Asia were expected to record the slowest growth, with 3.6 percent in 2022, down from 5.6 percent in 2021. East Asia was tipped to grow 4.7 percent, compared with last year’s cracking pace of 7.6 percent, as a slowing China grapples with a growing COVID-19 outbreak. Crisis-hit Sri Lanka was tipped to grow 2.4 percent-the worst performer in South Asia where the economy is expected to expand by 7.0 percent. – AFP