ADB says AI investments to drive developing Asia growth

SURGING global investments in artificial intelligence and easing inflation give developing Asia a launch pad for sustained economic growth in 2024 and 2025, the Asian Development Bank said Wednesday.

With goods exports jumping 8.0 per cent in July, the Manila-based lender slightly raised its 2024 economic growth forecast for the region to 5.0 per cent this year, up from 4.9 per cent projected in April.

It kept its 2025 forecast unchanged at 4.9 per cent.

Developing Asia refers to the multilateral lender’s 46 emerging member economies, stretching from Kazakhstan in Central Asia to the Cook Islands in the Pacific.

“High-income technology exporters benefited as global sales of semiconductors rose amid strong demand for artificial intelligence products” from China, Taiwan and South Korea, ADB chief economist Albert Park said.

The bank lowered its inflation forecast for the region this year to 2.8 per cent, from 3.2 per cent in April, as food prices bottom out more slowly than expected in China.

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The inflation forecast for 2025 is also revised down to 2.9 per cent, from 3.0 per cent earlier this year, “creating conditions for eventual monetary policy easing” to support economic activity.

Retreating inflation, increased global demand for electronics as well as cars and ships from China and South Korea, and an improved growth outlook for major advanced economies are helping Asia’s prospects, the bank said in a report.

Non-electronic exports are also growing, though more moderately, according to the Asian Development Outlook report, which the lender publishes biannually.

The ADB however said Beijing would fall short of its target of five per cent growth for 2024, forecasting expansion of 4.8 per cent.

After 5.2 per cent growth last year, the Chinese economy is expected to expand by 4.5 per cent in 2025 according to the new report.

“Protracted property sector weakness weighed on consumer sentiment and household spending, although higher investment supported by monetary and fiscal stimulus partially offset it,” it added.

Beijing on Tuesday announced what analysts described as its most significant stimulus package in years to boost the struggling economy.

ADB’s chief economist told a news conference the package was “good to see”, but “whether that will work I think remains to be seen”.

The lender also warned of a possible rise in protectionism, depending on the outcome of the US presidential election in November.

There may be “higher blanket tariffs by the US on all global imports” and reciprocal hikes on duties imposed by Beijing, with potential spillovers across developing Asia.

South Asia will be the fastest-growing part of the region this year, the bank said, even after India’s expansion slowed in the first half.

Helped by government spending and private consumption, India’s economy is forecast to grow by 7.0 per cent this year and 7.2 per cent in 2025.

The figures follow growth of 8.2 per cent last year. AFP