The US-China trade war darkens growth prospects for Asia in 2019: AfDB

MANILA (Reuters) – Southeast Asia may grow slower than expected as the trade war between China and the United States causes collateral damage to the region's export-dependent economies, the Asian Bank said on Wednesday. of development.

Tighter global liquidity could also weigh on activity by increasing borrowing costs, while capital outflows are also a risk.

The Manila-based institution maintained its economic growth estimate for the 2018 region at 6.0% in an update of its Asian development outlook. But he slashed next year's forecast to 5.8 percent from 5.9 percent.

Yasuyuki Sawada, AfDB chief economist, underlined the potential impact of trade tensions between the US and Sino on regional supply chains and the risk of sudden capital outflows if the Federal Reserve increased even faster rates of interest.

The ADB's 5.8% growth estimate for 2019 would be the slowest for the region – composed of 45 countries in the Asia-Pacific region – as it grew by 4.9% in 2001.

The United States and China imposed new tariffs on their products on Monday, with the world's largest economies showing no signs of retreating in the face of an increasingly bitter trade dispute that is expected to affect global economic growth.

The Chinese economy is expected to grow by 6.3 percent in 2019, the AfDB said, slower than its forecast of 6.4 percent in July and lower than its growth estimate of 6.6 percent for 2018, unchanged by compared to its previous prediction.

Beijing has set a growth target of around 6.5 percent this year, similar to last year's growth of 6.9 percent.

South Asia is expected to remain the fastest growing region, with the ADB maintaining its growth estimates at 7.0% for this year and 7.2% for next year.

However, moderate export growth, rising inflation, net capital outflows and a deteriorating balance of payments have dampened growth prospects in Southeast Asia.

"Policymakers have a range of policy tools at their disposal to manage pockets of vulnerability and maintain stability, but they must be applied with caution," Sawada said.

Inflation in the region is expected to remain under control, favored by country-specific factors such as moderate food price inflation in India and China and fuel subsidies in Indonesia and Malaysia, the report said. AfDB.

He maintained the inflation forecast at 2.8% this year but raised the forecast for next year to 2.8% from 2.7% in July.