ADB trims Southeast Asian outlook as 'temporary' factors drag down growth
Thailand's coup, export ban in Indonesia and riots in Vietnam cited as weighing down growth
The Asian Development Bank trimmed its growth forecast for Southeast Asia this year by 0.3 percentage point as the region was weighed down by Thailand's political turmoil and coup, Indonesia's mineral export ban and industrial park riots in Vietnam, although it said any adverse impact should only be temporary.
ADB said in its Asia Development Outlook Supplement released yesterday that the region was now expected to grow 4.7 per cent this year, down from its forecast of 5 per cent in April.
"The outlook for Southeast Asia has softened as growth prospects falter in Indonesia, Thailand and Vietnam," an ADB statement said. "As the factors slowing growth are expected to be temporary, the forecast growth of 5.4 per cent [for this year] has been maintained."
The report said the temporary ban on select mineral exports by Indonesia, low commodity prices and soft export demand undermined export recovery in the region's biggest economy. The country's growth slowed to 5.2 per cent in the first quarter of this year.
The mineral export ban was introduced in January to encourage mineral processing in Indonesia in order to increase the value of its metal exports. But the World Bank estimated in March the ban would reduce the country's net trade balance by US$12.5 billion and generate a loss in fiscal revenues of US$6.5 billion from this year to 2017.
In Thailand, the lengthy political fighting has affected domestic demand and tourism, causing the economy to contract by 0.6 per cent in the first quarter.
Factory riots in Vietnam targeting Chinese-owned businesses in May, triggered by the deployment of a Chinese oil rig in disputed waters off Vietnam, forced the ADB to adjust its forecast for the country.
Edward Tsui, a vice-president of the Chinese Manufacturers' Association of Hong Kong, said the factories in Vietnam had mostly resumed normal operations, adding that some of the Chinese manufacturers would leave the country.
"They are moving their businesses to Myanmar instead," Tsui said.
The ADB said the election of the first majority government in India in 30 years had buoyed prospects in South Asia. The bank upgraded its 2015 forecast for India by 0.3 percentage point to 6.3 per cent "as anticipated reform bears fruit".
The sub-regional forecast was also pushed up to 6.1 per cent from 5.8 per cent given the improvement in India.
ADB said China was on track to meet its forecast of 7.5 per cent growth this year and 7.4 per cent next year. For Asia as a whole, the ADB maintained its April forecast of 6.2 per cent growth this year and 6.4 per cent next for the region's 45 developing economies.