ADB cuts India growth outlook, says trade war, Brexit biggest global risks

India's economy to expand 7.2%, down from 7.6% previously

The Asian Development Bank downgraded economic growth forecasts for India and Southeast Asia for 2019 as global risks from trade tensions to Brexit mount.

Gross domestic product in India will probably increase 7.2 percent this year, down from a December forecast of 7.6 percent, according to the ADB’s latest Asian Development Outlook report. Southeast Asia’s growth estimate was lowered by 0.2 percentage point to 4.9 percent.

A drawn-out or deteriorating trade conflict between China and the U.S. could damp investment, the ADB said, while the U.K.’s potential chaotic exit from the European Union and financial market volatility comes with additional risks.

“With various uncertainties stemming from U.S. fiscal policy and a possible disorderly Brexit, growth in the advanced economies could turn out slower than expected, undermining the outlook” for China and other economies in the region, Yasuyuki Sawada, the ADB’s chief economist, said in the report.

Key Insights

China’s growth forecast for 2019 maintained at 6.3 percent, with economy seen slowing to 6.1 percent in 2020

While the risk of sharp increases in U.S. interest rates seem to have eased, “policy makers must remain vigilant in these uncertain times,” Sawada said.

The biggest economic blocs in developing Asia will see softer consumer price growth this year than previously forecast.

Exchange rate volatility can be problematic, particularly for nations that rely on dollar debt. Suitable monetary tools, regional dialogue and deeper domestic markets must be considered to cushion impact of tighter external funding conditions