New Delhi: The Asian Development Bank on Wednesday lowered the growth forecast for developing Asia to 5.7 percent in 2016 and 2017, weighed down by subdued global demand and a slowing Chinese economy.
In the new Asian Development Outlook (ADO) 2016, ADB forecasts gross domestic product (GDP) growth at 5.7 percent in 2016 and 2017 for the region.
In 2015, GDP growth was 5.9 percent.
The ADO Supplement released in December had projected developing Asia to grow at 6 per cent in 2016.
"Growth is slowing across much of developing Asia as a result of the continued weak recovery in major industrial economies and softer growth prospects for the People's Republic of China (PRC). This will combine to push growth in developing Asia for 2016 below previous projections," ADB said.
For China, ADB has projected growth to decline from 6.9 percent in 2015 to 6.5 percent in 2016. In 2017, growth will slow down to 6.3 percent.
India, ADB said, will remain one of the fastest growing major economies in the period ahead.
Growth will dip to 7.4 percent in 2016-17 and with measures to fund stalled projects and an uptick in bank credit, it will pick up to 7.8 percent in 2017-18. India's economy expanded by 7.6 percent in 2015-16.
"Reforms geared to attract more foreign direct investment and stronger corporate and bank balance sheets will help maintain growth momentum," it said, adding that while macroeconomic fundamentals are strong, progress on major structural reform is expected to be gradual.
ADB further said potential interest rate hikes by the US Federal Reserve, combined with broader weakness of emerging markets, signal that risks to Asia's growth forecast remain "tilted to the downside".
"Heightened investor risk aversion, intensified global financial market volatility and a sharper-than-forecast growth slowdown in China would further weaken the global outlook and directly hurt regional exports and growth," the multilateral lender said.
Developing Asia will contribute around 60 percent of global growth in the next 2 years.
"Solid growth in India and a pick-up in aggregate growth in the Association of Southeast Asian Nations (ASEAN) will help balance continued growth moderation in the People's Republic of China," ADB said.
It added that countries across the region should continue to implement productivity-enhancing reforms, investment in under-supplied infrastructure and sound macroeconomic management to help increase their growth potential and insulate themselves from global instability.
As regards industrial economies, ADB said growth is unlikely to pick up this year. It will stay at 1.8 percent in 2016, before inching up to 1.9 percent in 2017.
"Stronger consumption and investment in the US will be tempered by soft external demand. Both the eurozone and Japan will see slightly improved prospects," the report said.