Report: Asian economies lag behind, trade tensions hold back growth

BANGKOK – Trade tensions between China and the United States are weighing heavily on the economies of the region, growth should continue to slow in the next two years, announced the Asian Development Bank in a report released Wednesday.

The latest economic outlook for the regional lender based in Manila, Philippines, predicts that growth in developing Asia will slow slightly to 5.7 percent this year and 5.6 percent in 2020. In 2017, the growth was 6.2%.

"The main risk for the outlook remains the ongoing trade conflict, as heightened uncertainty about trade policies can have a negative impact on investment and manufacturing activity," he said. "A further downturn in advanced economies or the PRC (People's Republic of China) is another risk."

The annual update comes as China and the United States prepare for a new round of talks this week in Washington to resolve their dispute over China's industrial policy and the technology.

After an escalation of the conflict in mid-2018, with both parties imposing multibillion-dollar tariffs on their respective products, world trade weakened, contracting by almost 2% in January by compared to the previous year, says the report.

The growth momentum of the first nine months of the year began to fade in the last quarter. Growth in industrial production has also shown signs of weakness, according to the AfDB report.

This is an additional burden as the economic cycle of major economies begins a "negative trend," said AfDB Chief Economist Yasuyuki Sawada.

"This global economic cycle seems to have an impact on Asian economies," he said in an interview. "These are not just trade tensions."

Other reports report similar gloom in the region, which remains the main driver of global economic growth.

The latest series of purchasing managers' indices showed a slight improvement in exports in March from January to February for Indonesia, Vietnam, Thailand and Taiwan as well as for China.

"But other data suggests that growth in China may well weaken again in the near term," Capital Economics said in a report. "As such, we believe that it is too early to predict a turning point in the destiny of the manufacturing sectors in the region."

The Asian Development Bank expects growth in major economies to return to 1.9% in 2019 and 1.6% in 2020 from 2.2% last year. The US economy is expected to grow at an annual rate of 2.4% this year, going from 2.9% in 2018, to 1.9% in 2020. Japan's growth will remain stable at 0.8% this year, according to estimates. 0.6% next year.

The bank expects euro area growth to fall to 1.5% in 2019 and 2020, compared to 1.8% in 2018.

On the positive side, inflation is likely to remain manageable and domestic demand in many Southeast and South Asian economies is strong, the Asian Development Bank said.

This is less the case in East Asia, where consumers have become more cautious: auto sales in China, for example, have plunged in recent months into one of the biggest swings in confidence.

Developing countries in Asia are seeing increased investment from many parts of the world, including China, he said. China's foreign direct investment in new projects such as renewable energy, textile mills and real estate in the region has almost tripled, while US investment has jumped nearly three-quarters.

Although the ADB report focuses primarily on trade and investment, the bank urged governments in the region to devote more resources to promoting resilience and taking steps to prevent or mitigate Natural disasters.

The report noted that 84% of the 206 million people affected by natural disasters each year between 2000 and 2018 were living in Asian developing economies. More than half of the 60,000 people who died as a result of such disasters have occurred every year in this region, which is experiencing a significant share of extreme weather events and earthquakes.

According to the report, a significant portion of the $ 1.7 billion in annual investments in infrastructure needed over the next decade should be devoted to reducing the risks badociated with such disasters.

Insurance is a concern.

"Almost all direct damage is not covered by insurance," Sawada said.

Weather forecasts and warnings in the Asia-Pacific region, which is home to four out of five people affected by storms and other disasters, could also yield good results.

While earthquakes and tsunamis are virtually impossible to predict, with regard to extreme weather conditions, "it is possible to build mechanisms and put in place early warning systems," Sawada said. . "There is a huge potential."

Copyright 2019 The Associated Press. All rights reserved. This material may not be published, disseminated, rewritten or redistributed.