China’s COVID restrictions mean that its economic growth will be slower than the rest of emerging Asia this year for the first time in more than three decades, according to a new report from the Asian Development Bank.
The organization reduced its forecast for China’s 2022 growth to 3.3% from 5.0% in April in an updated Asian Development Outlook report released on Wednesday. In addition, the bank reduced its forecast for next year to 4.5% from 4.8%.
The region’s largest economy-imposed lockdowns to combat outbreaks under its zero-COVID strategy, even as other countries eased restrictions to reopen their economies.
According to the ADB, these lockdowns exacerbate the region’s other economic challenges. These are primarily the result of Russia’s protracted invasion of Ukraine, which has increased global food and fuel inflation and prompted advanced economies to raise interest rates.
Developing Asia as a whole is expected to grow at a 4.3% annual rate in 2022, down from a 5.2% estimate in April. The region is expected to grow 5.3% excluding China, according to the ADB.
The Asian Development Bank (ADB) defines developing (or emerging) Asia as one of its 46 regional members in Asia and the Pacific, which includes all of the region’s economies except Japan. The emerging Asian region is expected to grow at a 4.9% annual rate in 2023, rather than 5.3%.
“Developing Asia continues to recover, but risks loom large,” ADB Chief Economist Albert Park said in a statement.
“A significant downturn in the world economy would severely undermine demand for the region’s exports,” Park said. “Stronger-than-expected monetary tightening in advanced economies could lead to financial instability. And growth in [China] faces challenges from recurrent lockdowns and a weak property sector.”
The ADB expects regional inflation to rise to 4.5% this year, up from 3.7% in its previous forecast. Next year, price increases are expected to stabilize at 4.0%, which is higher than the previous forecast of 3.1%.
Rising inflation, according to the bank, is expected to dampen South Asia’s recovery, which is expected to grow 6.5% this year rather than 7.0%.
The growth forecast for India, the largest economy in South Asia, has been reduced to 7.0% from 7.5%, with a 7.2% expansion expected next year. The economy of crisis-hit Sri Lanka is expected to contract 8.8% this year, before slowing to 3.3% in 2023.
Pakistan, which grew 6% in its fiscal year ended June 2022, is expected to grow at a slower rate of 3.5% in 2023 as IMF-backed efforts to reduce the country’s fiscal deficit curb economic activity, according to the ADB.
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