Trade war and China economic slowdown sees Asian Development Bank cut regional growth forecasts

Manila-based lender has cut its growth forecast for China in 2019 from 6.3 per cent in April to 6.2 per cent, citing ‘weakening trade momentum’

Hong Kong and Singapore see their growth forecasts slashed severely, as effects of protests and China’s slowdown percolate through region

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Trainees at a garment factory work at Snowtex garment factory in Dhamrai, near Dhaka, Bangladesh. Photo: AP

Published: 9:30am, 25 Sep 2019Updated: 9:30am, 25 Sep 2019

China’s economic outlook has been downgraded, along with other Asian trading hubs, with the Asian Development Bank citing gloomier prospects due in part to the escalating tariff war and slowing Chinese economy.

Economists at the Manila-based lender downgraded China’s growth forecast in 2019 from 6.3 per cent in April to 6.2 per cent in a report released on Wednesday. Growth in 2020, the development bank predicts, will be 6.0 per cent, down slightly from 6.1 per cent forecast previously.

The Asian Development Bank (ADB) also severely slashed its outlook for protest-ravaged Hong Kong, which it expects to grow at 0.3 per cent this year compared to April’s forecast of 2.5 per cent, citing “recent political tensions, spillover from the trade conflict, and the global electronics downturn”. Singapore will grow at 0.7 per cent this year, a big downgrade from the 2.6 per cent predicted in April, while there were also significant downgrades for the Philippines and Thailand.

The ADB also cut its growth forecast for the region, which includes 45 nations, to 5.4 per cent this year from April’s forecast of 5.7 per cent. Growth of 5.5 per cent is now predicted for 2020, down from 5.6 per cent previously, highlighting how the trade war and China’s economic malaise are resonating through the region.

“The China-US trade conflict could well persist into 2020, while major global economies may struggle even more than we currently anticipate. In Asia, weakening trade momentum and declining investment are the major concerns,” said the ADB’s chief economist Yasuyuki Sawada. “These are all issues that policymakers must monitor closely.”

There is already evidence of trade being redirected from China to other economies in developing Asia, such as Vietnam and Bangladesh due to the 14-month tariff war between the US and China. The ADB said escalation and broadening of the trade war may continue to reshape regional supply chains, with f oreign direct investment following a similar pattern.