MANILA, Philippines (AP) -- The Asian Development Bank said Monday it had cut its 2016 growth projection for developing economies in Asia and the Pacific to 5.6 percent, down from its earlier forecast of 5.7 percent, but added that the economies' performance will remain solid and help offset softness from the U.S. economy and near-term market shocks from Britain's vote to exit from the European Union.
The Manila-based lender's report said the growth forecast for 2017 of 5.7 percent made in March remains unchanged.
"Although the Brexit vote has affected developing Asia's currency and stock markets, its impact on the real economy in the short term is expected to be small," said Shang-Jin Wei, the ADB's chief economist. "However, in light of the tepid growth prospects in the major industrial economies, policy makers should remain vigilant and be prepared to respond to external shocks to ensure growth in the region remains robust."
China, the world's second-biggest economy, is on track to meet earlier growth projections of 6.5 percent in 2016 and 6.3 percent in 2017, with the government expected to continue fiscal and monetary stimulus measures to support its targets. For East Asia as a whole, growth forecasts are unchanged at 5.7 percent in 2016 and 5.6 percent in 2017 despite muted activity in Hong Kong and South Korea, the report said.
But growth this year and next will be led by South Asia, which is expected to be the fastest growing sub-region, with India likely to meet projected growth target of 7.4 percent this year and 7.8 percent next year, supported by brisk consumer spending and growth in the rural economy.
In Southeast Asia, growth projections for 2016 and 2017 remain unchanged at 4.5 percent and 4.8 percent. Solid performance of most economies in the sub-region for the first half of this year was driven by private consumption, except for Vietnam where a worsening drought caused a contraction in the agricultural sector.
In Central Asia, 2016 growth forecast was trimmed to 1.7 percent from 2.1 percent, and for 2017 it was cut to 2.7 percent from 2.8 percent due to a slump in revenues from hydrocarbon exports of Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan and the recession in Russia.
Growth this year in the Pacific is expected to slow to 3.9 percent from 7.1 percent in 2015, with the Fijian economy reeling from Cycline Winston. But stronger-than-expected tourism receipts are boosting the economies of Cook Islands and Samoa while post-cyclone reconstruction is helping Vanuatu's economy.