The Asian Development Bank is neither optimistic nor pessimistic about its growth forecast for developing Asia this year. The region is on track to recover from the COVID-19 pandemic but a dark cloud has emerged on the horizon that could slow down Asia’s economic recovery.
The financial institution slightly lowered Asia’s growth forecast to 5.2 percent for 2022 from its earlier estimate of 5.3 percent in December and the actual 6.9-percent expansion registered in 2021. The ADB noted that “increasing” price pressures in the continent, in the wake of Russia’s invasion of Ukraine, were threatening the economic recovery from COVID-19 surges.
Nations across Asia, including India, the Philippines, Sri Lanka and Indonesia, are reeling from high domestic pump prices of petroleum products. The elevated oil prices are raising the cost of food, transportation, electricity and other services. Rising inflation, in turn, may prompt central banks across the continent to hike interest rates in order to contain price pressures and preserve the value of currencies.
Energy bills, says the Asian Development Outlook report, will rise for energy importers, pushing inflation up and weighing on demand. But the ADB still considers COVID-19 as a more potent growth dampener than the Russian invasion of Ukraine, citing that risks from the emergence of more deadly variants and the Omicron outbreak in China will threaten regional growth and supply chains.
The ADB, meanwhile, has a positive perspective on the Philippine growth story for this year. It sees the economy expanding 6 percent this year, stronger than the actual growth of 5.6 percent in 2021. The Philippines’ economic recovery, it says, is expected to gain traction this year and the next, underpinned by rising domestic investment and consumption as pandemic restrictions eased, allowing for more manufacturing and construction activities.
The Asian financial institution took note of Manila’s measures to reopen the economy, lift mobility restrictions, expand the vaccination coverage of the population and relax international travel restrictions to boost the services sector.
Asian economies are poised to recover this year given the declining COVID-19 cases in the continent and despite the war in Europe. Asian governments should just stick to sound macro-economic fundamentals and resist populist calls that will stall the recovery efforts and ultimately ruin their economy.