Growth is slowing in many developing countries in Asia as a result of the continued weak recovery in major industrial economies and softer growth prospects for the People’s Republic of China.
Developing Asia is projected to grow at 5.7% in both 2016 and 2017, down slightly from 5.9% in 2015, due chiefly to considerable global headwinds and moderating growth in the People’s Republic of China.
Commodity price declines dragged inflation down to 2.2% in 2015. Regional inflation will revive to 2.5% in 2016 as domestic demand strengthens, and rise further to 2.7% in 2017 as global commodity prices recover.
Risks are tilted to the downside as tightening US monetary policy may heighten financial volatility, further moderation in the People’s Republic of China could spill over into its neighbors, and producer price deflation may undermine growth in some economies.
Reform to raise labor productivity can invigorate developing Asia’s potential growth.