Rising twin deficits in the fiscal and current accounts weigh on Pakistan's economic outlook, according to a report of Asian Development Bank (ADB). In a supplement to its Asian Development Outlook (ADO), the ADB maintained that preliminary official estimates for Pakistan show growth in fiscal year 2019 (ended 30 June 2019) deteriorating to 3.3 percent, the lowest rate in 8 years, pulled down by weak performance across the board.
Elsewhere in the sub-region, inflation averaged at 5.5 percent in Bangladesh in the first 11 months of fiscal year 2019, in line with ADO 2019 forecasts, while inflation in Pakistan almost doubled from 3.8 percent in the same period of fiscal year 2018 to 7.2 percent. The report further states that developing Asia will maintain strong but moderating growth over 2019 and 2020 as supportive domestic demand counteracts an environment of global trade tensions.
The ADB maintains growth forecasts for developing Asia at 5.7 percent in 2019 and 5.6 percent in 2020 - unchanged from its April forecast. These growth rates are slightly down from developing Asia's 5.9 percent growth in 2018. Excluding the newly industrialised economies, the regional growth outlook has been revised down from 6.2 percent to 6.1 percent in 2019 and maintained at that rate in 2020. Deepening trade tension between the People's Republic of China (PRC) and the United States (US) remains the largest downside risk to this outlook, despite an apparent truce in late June that could allow trade negotiations between the two countries to resume.
"Even as the trade conflict continues, the region is set to maintain strong but moderating growth," said ADB Chief Economist Yasuyuki Sawada. "However, until the world's two largest economies reach agreement, uncertainty will continue to weigh on the regional outlook." The growth outlook for East Asia in 2019 has been revised down to 5.6 percent because of slower than expected activity in the Republic of Korea. The sub-region's growth outlook of 5.5 percent for 2020 is unchanged from April. Growth for the sub-region's largest economy, the PRC, is also unchanged, with forecasts of 6.3 percent in 2019 and 6.1 percent in 2020, as policy support offsets softening growth in domestic and external demand.
In South Asia, the economic outlook is robust, with growth projected at 6.6 percent in 2019 and 6.7 percent in 2020, albeit lower than forecast in April. The growth outlook for India has been cut to 7 percent in 2019 and 7.2 percent in 2020 because the fiscal 2018 outturn fell short.
The outlook for Southeast Asia has been downgraded slightly to 4.8 percent in 2019 and 4.9 percent in 2020 due to the trade impasse and a slowdown in the electronics cycle. In Central Asia, the growth outlook for 2019 has been revised up to 4.3 percent on account of an improved outlook for Kazakhstan. Central Asia's growth outlook of 4.2 percent for 2020 is unchanged from April. The growth outlook in the Pacific - 3.5 percent in 2019 and 3.2 percent in 2020 - is unchanged, as the sub-region continues to rebound from the effects of Cyclone Gita and an earthquake in Papua New Guinea, the sub-region's largest economy.
The major industrial economies have had slight revisions to their growth forecasts, with the US revised up to 2.6 percent for 2019 and the Euro area revised down to 1.3 percent. The growth outlook for Japan is unchanged at 0.8 percent in 2019 and 0.6% in 2020.
Developing Asia's inflation projections were revised up from 2.5% to 2.6% for both 2019 and 2020, reflecting higher oil prices and various domestic factors, such as the continuing outbreak of African swine fever in several Asian economies, which is expected to drive up pork prices in the PRC.