ADB trims developing Asia's growth forecasts over Omicron risks

The Asian Development Bank on Tuesday trimmed its growth forecasts for developing Asia for this year and next to reflect risks and uncertainty brought on by the new Omicron coronavirus variant.

The Manila-based lender now sees 2021 gross domestic product (GDP) growth of 7.0 per cent for developing Asia, down from 7.1 per cent, and 2022 growth of 5.3 per cent, down from 5.4 per cent in September.

"Covid-19 has receded in developing Asia, but rising infections worldwide and the emergence of a fast-spreading variant suggest that the pandemic will take time to play out," the ADB said in a supplement to its Asian Development Outlook report.

Most of developing Asia's sub regions are forecast to grow slower than previously thought this year, due in part to a weak recovery in China.

China's economy, which staged an impressive rebound from last year's pandemic slump, has lost momentum in recent months as it grapples with surging prices, a slowing manufacturing sector, debt problems in the property market and persistent COVID-19 outbreaks.

The ADB projects China's economy will grow 8.0 per cent this year, slightly weaker than its 8.1 per cent estimate in September, before it slows to 5.3 per cent in 2022, down from its earlier projection of 5.5 per cent.

The recent emergence of Omicron, which the World Health Organization says has been reported by more than 60 countries since it was first detected last month in southern Africa and Hong Kong, "is a sobering reminder that further outbreaks remain a possibility," the ADB said.

The ADB trimmed its 2021 growth forecast for India to 9.7 per cent from the 10.0 per cent estimate it made in September, but left a 2022 growth forecast unchanged at 7.5 per cent.

To take into account Southeast Asia's slower third quarter expansion, the ADB cut its growth forecast for the sub region to 3.0 per cent for 2021 from 3.1 per cent, but it raised its growth projection for the sub region next year to 5.1 per cent from 5.0 per cent.

Inflation is expected to remain manageable in Asia, the ADB said, which would allow monetary policy to stay supportive of growth amid continued risks from the pandemic.