According to the Asian Development Bank report released on Wednesday, developing economies in Asia are expected to grow at a rate of 5.0% per year in 2024, boosted by a robust U.S. economy and a surge in demand for computer chips that drive artificial intelligence technologies. This outlook marks a slight increase from the ADB’s previous estimate of 4.9% growth in April. However, the report cautioned about the potential risks posed by increased protectionist measures, such as higher tariffs on Chinese exports, depending on the outcome of the U.S. presidential election.
The report identified several positive trends in the region, including a rebound in exports of computer chips and advanced electronics due to the rapid adoption of artificial intelligence. Despite moderating energy and food prices, inflation remains high in countries like Pakistan, Laos, and Myanmar. The global demand for semiconductors and related electronic materials has particularly benefitted countries like Taiwan, Hong Kong, Singapore, South Korea, the Philippines, and Thailand. The report referenced data from the World Semiconductor Trade Statistics, projecting a 77% expansion in spending on memory chips crucial for AI applications.
The upcoming U.S. presidential election adds a layer of uncertainty, with potential impacts on global trade dynamics. The report highlighted concerns over heightened U.S.-China trade tensions and the negative spillovers this could have on developing Asian economies through various channels. Former President Donald Trump’s trade strategies and Vice President Kamala Harris’s opposing views on tariffs were also mentioned in the report.
Furthermore, Asia’s developing economies are susceptible to external factors that could affect their currencies and borrowing costs, particularly in response to moves made by the United States. The report underscored China’s weakening property market as a significant risk factor and maintained growth forecasts for the country at 4.8% in 2024 and 4.5% in the following year. The ADB’s chief economist, Albert Park, commended recent efforts by Beijing to reduce borrowing costs and promote home purchases, indicating positive momentum in China’s economic policies.
Additional highlights from the report emphasized the return of energy inflation to pre-pandemic levels, providing relief to economies reliant on oil imports like Sri Lanka, China, and Japan. While food inflation remains slightly elevated, prices are showing a downward trend. Rice prices, for instance, decreased by 12% in late August, and are projected to continue falling with anticipated record harvests in the upcoming growing season. The report also mentioned the potential impact of the La Nina climate phenomenon, which could bring beneficial rainfall to some regions while posing risks of flooding in others.