JAKARTA: The Asian Development Bank (ADB) has revised its economic growth forecast for developing Asia and the Pacific to 5.0 per cent this year, up from the previous estimate of 4.9 per cent in April.
The projection is driven by robust domestic demand and strengthening export growth.
At the same time, the bank also lowered its inflation forecast for the region to 2.8 per cent this year from 3.2 per cent previously, but maintained the inflation forecast for next year at 4.9 per cent.
In its latest 'Asian Development Outlook September 2024' released on Wednesday, the ADB attributes the optimistic outlook to stronger-than-expected economic expansions in East Asia, the Caucasus, Central Asia, and the Pacific.
It said the rising global demand for semiconductors, fueled by the artificial intelligence boom, is boosting exports, while the easing global food prices and the delayed effects of monetary policy have reduced inflation to near pre-pandemic levels.
"Strong economic fundamentals will continue to underpin expansion this year and next.
"Financial conditions are expected to improve as inflation moderates further and the United States (US) eases its monetary policy. This will support the positive outlook for the region," said ADB chief economist Albert Park.
Despite the encouraging forecast, the ADB highlighted potential risks, including worsening trade tensions between the US and China, further deterioration in China's property market, escalating geopolitical tensions, and the impacts of climate change on commodity prices and food security.
For China, the largest economy in developing Asia and the Pacific, the growth forecast remains at 4.8 per cent for this year and 4.5 per cent in 2025.
Meanwhile, the economic growth forecast for India, the region's second-largest economy, remains at 7.0 per cent for this year, driven by strong domestic demand and increased government spending.
Concurrently, the ADB raised its growth forecast for the Caucasus and Central Asia to 4.7 per cent this year from 4.3 per cent projected in April, thanks to improved domestic demand, bolstered by remittances in some economies.
The Pacific's growth forecast has been adjusted upward to 3.4 per cent from 3.3 per cent previously, driven by an increase in tourist arrivals.
However, the growth forecast for Southeast Asia has been slightly lowered by 0.1 percentage point to 4.5 per cent, attributed to a decline in public investments and a slower-than-expected recovery in exports.