- The Asian Development Bank (ADB) had released its latest Asian Development Outlook Supplement yesterday and had trimmed its regional growth forecasts for both this year and next year.

- Developing Asia is expected to grow at a slower pace of 6.3% in 2013 and 6.4% in 2014. In April, ADB had predicted the region to advance by 6.6% this year and 6.7% next year.

- The downward revision to the region’s growth projection is due to weaker than expected growth for China during 1H13 while tighter credit will continue to dampen growth prospects ahead. ADB expects China to grow by 7.7% in 2013 and 7.5% in 2014.

- In India, the slowdown in the accumulation of fixed capital formation, slacks in industrial production and slower than expected progress on economic reforms are weighing on the economy. ADB anticipates the economy to expand by 5.8% in 2013 and 6.5% in 2014. As for South Asia, the region is likely to grow by 5.6% in 2013 and 6.2% in 2014.

- Following a generally solid growth in 1Q13, the ADB foresees growth in Southeast Asia to be tempered by the slowdown in China and continued weak demand from advanced economies for its exports. Capital outflows from the region have fuelled stock market volatility, but the real economy has so far been largely unaffected. ASEAN-5 is poised to grow by 5.2% in 2013 and 5.6% in 2014.

- Meanwhile, monetary authorities in developing Asia are preparing to safeguard the soundness of the financial sector to avoid the emergence of disruptive asset bubbles. Though exports demand remained sluggish, income growth and healthy labour market condition have triggered strong credit expansion within the financial system.

- As for Malaysia, economic growth slowed on weaker external demand and moderating domestic demand during 1Q13.The Bank did not provide further updates for Malaysia in the recent report release. Based on its update in April, ADB envisage full year growth for Malaysia of 5.3% in 2013 and 5.5% for 2014.

- In terms of inflation outlook, slow GDP growth in the region is helping to contain demand-side inflationary pressure in developing Asia and especially so for ASEAN-5. At the same time, commodity prices are set to decline at a faster pace than previously anticipated.

- Having said that, Indonesia slashed fuel subsidies by 44% in June 2012 and that raised the country’s inflation to 5.9% during the month (May: +5.5%).

- Separately, the other ASEAN-5 economies including Malaysia, the Philippines, Thailand, and Vietnam are expected to pose low rates of inflation in 2013. For these economies, the ADB anticipates inflation to be within or below its full year projections.

Source: AmeSecurities