The Asian Development Bank yesterday downgraded its 2014 economic outlook for Southeast Asia, citing political tensions in Thailand and Vietnam and soft external demand in Indonesia
The Manila-based agency said in a supplement to its economic outlook for the region that it expected gross domestic product to grow by 4.7 per cent for the year, compared with its April projection of 5 per cent.
The bank warned that Indonesia, the region’s biggest economy, faced a long period of uncertainty following last week’s disputed presidential election, compounding problems as growth sits at four-year lows and foreign investment shrinks.
In Thailand, the economy contracted 0.6 per cent in the first three months of the year, as political deadlock hit domestic demand and the crucial tourism industry, while it warned of further shrinkage in the second quarter.
The economy was racked by nearly seven months of protests that saw 28 people killed and paralysed the government of former prime minister Yingluck Shinawatra.
However, the bank said that with a military coup in May, consumer confidence had improved and there was a “tentative sign that a modest recovery may take hold in the second half of the year”.
The bank also said adjustments were made to Vietnam’s economic forecast because of the effect of tensions with China.
Relations between Hanoi and Beijing plummeted when, in May, a Chinese oil rig was moved near the disputed Paracel Islands in the South China Sea, which are claimed by both countries.
“Recent data suggest that Southeast Asia has softened … as growth prospects faltered,” the ADB supplement said, adding that it foresees GDP growth of 5.4 per cent in 2015.
Its growth estimate for developing Asia, which covers 45 nations, was unchanged at 6.2 per cent in 2014 and 6.4 per cent next year.
“The growth outlook for developing Asia is stable, with the region projected to grow steadily,” the statement said, adding that downgrades for Central Asia, Southeast Asia and the Pacific were balanced by an upward revision for South Asia.
The ADB expects Chinese growth to remain at 7.5 per cent this year, with a slight drop to 7.4 per cent in 2015It also said there was an improved outlook for India after the election of conservative Prime Minister Narendra Modi.