Growth remains strong across most of developing Asia but is set to moderate this year and next year against the backdrop of slowing global demand and persistent trade tensions, according to a new Asian Development Bank (ADB) report.

The latest Asian Development Outlook (ADO) 2019, ADB’s flagship economic publication, forecasts that growth in the region will soften to 5.7% in 2019 and 5.6% in 2020.

Trade conflict between the United States and China is still the primary risk to the region’s economic outlook with protracted negotiations propelling further global trade uncertainty, the report says.  Other risks are reportedly a potentially rapid slowdown in advanced economies and China, as well as financial volatility.

According to the report, growth will moderate in 2019 across most of developing Asia.  Only 20 of 45 individual economies are projected to see growth accelerate in 2019.  By subregion, aggregate growth rates in Central Asia, East Asia, and Southeast Asia are expected to decelerate, while South Asia and the Pacific will bounce back from slowdown in 2018. South and Southeast Asia will grow more quickly in 2020 than in 2019.

The report notes that lower oil prices, alongside slower growth in the Russian Federation will weigh on economies in Central Asia. 

Central Asia will slow again after growth picked up in 2018.  Average growth in the subregion rose from 4.2% in 2017 to 4.4% last year as higher oil prices restored growth to Azerbaijan and expansion accelerated in Tajikistan and Uzbekistan, the latter reflecting the authorities’ revision of statistics in prior years.

Growth remained unchanged in Georgia and Kazakhstan and slowed in Armenia, Kyrgyzstan, and Turkmenistan, the last reflecting fiscal tightening.

Growth in the subregion is forecast to slow to 4.2% in both 2019 and 2020 with lower average oil prices trimming expansion in Kazakhstan, and despite improvement in Azerbaijan, Georgia, Kyrgyzstan, and Uzbekistan.  With tight monetary policy reducing inflation in Kazakhstan and particularly in Azerbaijan, where the exchange rate stabilized, average inflation in the subregion fell from 9.0% in 2017 to 7.9%, despite acceleration in Armenia, Turkmenistan, and Uzbekistan.  Inflation is projected to slow further to 7.8% in 2019 and 7.2% in 2020 with further tightening of fiscal policy in Turkmenistan and monetary policy in Kazakhstan, as well as slower credit growth in Uzbekistan.