GO
Loading...

Developing Asia set for steady growth in 2014: ADB

A vendor hawks fruits along a street in downtown Hanoi
Hoang Dinh Nam | AFP | Getty Images
A vendor hawks fruits along a street in downtown Hanoi

Developing Asia will likely maintain steady economic growth in 2014 as higher demand from a recovery in developed markets will be offset by China's slowdown, the Asian Development Bank said.

Gross domestic product (GDP) for the region is forecast to grow 6.2 percent in 2014, edging up from 6.1 percent in 2013, with another 6.4 percent expected in 2015, the ADB said in its annual Asian Development Outlook report released Tuesday.

Read MoreAsia is better prepared for economic travails: ADB president

"Moderating growth in the People's Republic of China as its economy adjusts to more balanced growth will offset to some extent the stronger demand expected from the industrial countries as their economies recover," it said.

It expects the U.S., the euro area and Japan to see growth increase to a collective 1.9 percent in 2014 and 2.2 percent in 2015, from 1.0 percent in 2013. But China's growth is set to slow to 7.5 percent in 2014 and 7.4 percent in 2015, compared with 7.7 percent in 2013, it said.

The ADB believes risks to Asia's outlook have eased to manageable levels.

"Most regional economies have strengthened their economic fundamentals," it said. In addition, although the U.S. Federal Reserve began tapering its asset purchases, the tightening in global liquidity can be mitigated by accommodative policy in Europe and Japan, it said.

Read More'Hot money' ride could be getting put on ice

Even though foreign capital flowed out of the region's markets in mid-2013, developing Asia still managed to maintain economic growth at the same pace as 2012, it noted.

But the ADB still sees three key areas of risk. Firstly, if China's efforts to curb credit growth are too abrupt and undermine growth too much, a deeper slowdown could drag its trading partners' prospects, the ADB said. In addition, so far, economic data in the major industrial countries have been mixed and their demand for Asia's goods could be softer than expected, it said.

Read MoreAsia's growth engines are in top gear

The third risk is that global financial markets could face another shock from changes in U.S. monetary policy, it said.

The ADB expects China's economic growth will slow to 7.5 percent in 2014 and 7.4 percent in 2015, slipping from 7.7 percent in 2013.

Last year, China's growth slipped for several reasons, including tightening credit growth, paring industrial overcapacity, deepening local government debt, rising wages and shifting development priorities "away from quantity toward quality," the ADB said.

"Growth is set to slow somewhat in the years ahead as policy promotes growth that is more equitable, sustainable, and balanced," it said.

To maintain growth and narrow income gaps, the ADB advocates developing Asia improve public investment.

"Developing Asia lags other regions in public investment to promote equity," it said, noting the region's public spending on education averages 2.9 percent of GDP, compared with 5.3 percent in developed markets and 5.5 percent in Latin America.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

Featured

Contact Asia Economy

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More