MANILA -- Softer growth prospects for China and a weak recovery in major industrial economies are expected to suppress economic growth in developing Asia and cut Thailand’s growth by half a percentage point, according to an Asian Development Bank report released Wednesday.
The Asian Development Outlook 2016 said the region will see growth fall to to 5.7% in 2016 and 2017, with below previous projections, with China moderating to 6.5% this year from 6.9% last year and to 6.3% next year. The region's economy grew 5.9% in 2015.
Slower exports, a falling labour supply and supply-side reforms are reshaping the world's second-largest economy toward more domestic consumption and a further reduction in excess industrial capacity, it said.
Thailand outlook
The ADB report says economic recovery in Thailand will gradually move forward over the next two years, bolstered by public investment.
Senior ADB economist for Thailand Luxamon Attapich said the economic growth projection for the country in 2016 was at 3% instead of 3.5% as earlier projected. It is based on the assumption that inflation will stay at 0.6%, the exports contract by 1% and current account surplus will come in at 7.5% of gross domestic product.
The bank estimated the economy would grow by 3.5% in 2017 with inflation at 2% and current account surplus at 4%.
She said the main driver for economic growth this year would be government investment, which is projected to grow by 10%. The bank believes that if the government opens bidding on 20 planned infrastructure projects, it would boost the economy.
Meanwhile, the measures to increase consumer spending during Songkran via the tax incentives will help to stimulate the economy next month, but not raise overall growth for 2016.
Ms Laxamon said Thailand still needs to watch for risks from the severe drought, falling farm prices and high household debt levels of 81% of GDP as they could impact consumer spending.
Regional growth
The report says India will remain one of the fastest-growing major economies, expanding by 7.4% in 2016 and 7.8% in 2017. Last year, India's economy grew 7.6%, with strong public investment boosting growth.
Southeast Asia's economy is set for stronger growth at 4.5% this year and 4.8% next year, up from 4.4% in 2015. The region will be led by its biggest economy, Indonesia, as it ramps up investment in infrastructure and implements policy reforms to spur private investment.
"(China's) growth moderation and uneven global recovery are weighing down overall growth in Asia," said Shang-Jin Wei, ADB's chief economist. "Despite these pressures, the region will continue to contribute over 60% of total global growth."
He urged countries across Asia to implement reforms to boost productivity, invest in under-supplied infrastructure, and follow sound macroeconomic management to increase growth potential and insulate them from global instability.
Aggregate growth in the United States, the euro area and Japan will stay at 1.8% in 2016 and inch up to 1.9% in 2017, the report said.