US policy changes likely to impact Asia and Pacific growth

By ADB analysts
Sun, December 15, 2024 | 8:00 am GMT+7

Asia and the Pacific’s economic growth will remain steady this year and next, but expected U.S. policy changes under the incoming administration of President-elect Donald Trump are likely to affect the region’s longer-term outlook, write Asian Development Bank (ADB) analysts in the latest edition of Asian Development Outlook (ADO).

Logo of Asian Development Bank (ADB). Photo courtesy of the bank.

Logo of Asian Development Bank (ADB). Photo courtesy of the bank.

Changes to U.S. trade, fiscal, and immigration policies could dent growth and add to inflation in developing Asia and the Pacific.

Because these significant policy changes are expected to take time and be rolled out gradually, the effects on the region would most likely materialize from 2026. Impacts could be seen sooner if the policies are implemented earlier and more rapidly than expected, or if U.S.-based companies front-load imports to avoid potential tariffs.

Developing Asia and the Pacific’s economies are projected to grow by 4.9% in 2024, slightly below ADB’s September forecast of 5%. Next year’s growth projection is lowered to 4.8% from 4.9%, mainly due to weaker prospects for domestic demand in South Asia.

The region’s inflation outlook has been trimmed to 2.7% from 2.8% for this year, and cut to 2.6% from 2.9% next year, partly due to an expected moderation in oil prices.

“Strong overall domestic demand and exports continue to drive economic expansion in our region,” said ADB chief economist Albert Park. “However, the policies expected to be implemented by the new U.S. administration could slow growth and boost inflation to some extent in China, most likely after next year, also impacting other economies in Asia and the Pacific.”

Under a high-risk scenario, ADB projects that aggressive U.S. policy changes could erode global economic growth slightly over the next four years, by a cumulative 0.5 percentage points.

Broad-based tariffs are likely to dent international trade and investment, while leading to a shift toward more costly domestic production. At the same time, reduced immigration could tighten the U.S. labor supply. Combined with a potentially more expansionary fiscal stance under the incoming Trump administration, tariffs and migration curbs could rekindle inflationary pressures in the U.S.

Despite the scale of the assumed U.S. policy changes, particularly on tariffs, the impacts on developing Asia and the Pacific are limited under this high-risk scenario. Even in the absence of additional policy support, GDP growth in China could slow by an average of only 0.3 percentage points per year through 2028.

Negative spillover effects across the region, via trade and other links, would likely be offset by diversion of trade and relocation of production from China to other economies.

In the near term, the outlook for most economies in the region remains relatively stable. The growth forecast for China is unchanged at 4.8% this year and 4.5% next year. India’s outlook is adjusted downward from 7% to 6.5% for this year, and from 7.2% to 7% next year, due to lower-than-expected growth in private investment and housing demand.

Southeast Asia’s growth outlook has been raised to 4.7% this year from a previous forecast of 4.5%, driven by stronger manufacturing exports and public capital spending. The forecast for next year is unchanged at 4.7%.

Vietnam’s growth forecast for 2024 is revised upward to 6.4% from 6% and for 2025 to 6.6% from 6.2%. Strong trade performance, a resurgence in export-led manufacturing, and ongoing fiscal stimulus measures drove Vietnam’s economic growth to 6.8% for the first three quarters of 2024.

The robust rebound in export-led manufacturing and trade, bolstered by the resilient U.S. economy, is expected to continue supporting GDP growth. Accelerated public investment and accommodative fiscal and monetary policies are anticipated to further stimulate domestic demand. Despite the severe impacts caused by typhoon Yagi in various parts of the country, the swift government response and recovery efforts limited the impacts on growth.

Accelerated public investment and accommodative fiscal and monetary policies are needed to further stimulate domestic demand amid increasing external headwinds.

The growth outlook for Caucasus and Central Asia has been raised to 4.9% this year from 4.7%, and to 5.3% next year from 5.2%, while projections for the Pacific are unchanged at 3.4% this year and 4.1% next year.

Apart from uncertainty surrounding U.S. policy changes, risks to developing Asia and the Pacific’s growth and inflation outlooks include escalations of geopolitical tensions as well as continued property market fragility in China.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 69 members - 49 from the region.

Comments (0)
  • Read More
Leading steelmaker Hoa Phat targets record revenue on partial operation of central Vietnam plant

Leading steelmaker Hoa Phat targets record revenue on partial operation of central Vietnam plant

Hoa Phat Group, Vietnam’s top steelmaker, targets a record-high revenue in 2025, driven by the expected partial operation of a steel and iron complex in the central region this year.

Companies - Thu, March 27, 2025 | 8:10 pm GMT+7

Offshore wind power developer CIP seeks long-term cooperation with Vietnam

Offshore wind power developer CIP seeks long-term cooperation with Vietnam

Copenhagen Infrastructure Partners (CIP), a major Danish renewable energy developer, is seeking to reach long-term cooperation with Vietnamese businesses in the offshore wind power sector.

Energy - Thu, March 27, 2025 | 4:16 pm GMT+7

Vietnam giant VinFast moves to expand EV service in Philippines

Vietnam giant VinFast moves to expand EV service in Philippines

VinFast, Vietnam’s largest electric vehicle (EV) manufacturer, has partnered with MGA.414 Corporation, the operator of the JIGA automotive service chain, to expand its EV service network in the Philippines.

Southeast Asia - Thu, March 27, 2025 | 3:48 pm GMT+7

Vietnam's MobiFone officially launches 5G services

Vietnam's MobiFone officially launches 5G services

MobiFone, one of Vietnam’s leading telecommunications providers, has officially commercialized its 5G services, becoming the third network operator in the country to do so.

Southeast Asia - Thu, March 27, 2025 | 3:45 pm GMT+7

Thanh Cong Group inaugurates first automobile manufacturing plant in Vietnam's Quang Ninh province

Thanh Cong Group inaugurates first automobile manufacturing plant in Vietnam's Quang Ninh province

Vietnamese automaker Thanh Cong Group officially inaugurated its Thanh Cong Viet Hung automobile manufacturing plant on Wednesday at the Viet Hung Industrial Park in the northern province of Quang Ninh.

Southeast Asia - Thu, March 27, 2025 | 3:32 pm GMT+7

Vietnam willing to open doors to US agricultural products: minister

Vietnam willing to open doors to US agricultural products: minister

Vietnam is actively preparing to open its market to U.S. agricultural products such as tangerine, plum, and lemon, Vietnamese Minister of Agriculture and Environment Do Duc Duy said on Wednesday.

Economy - Thu, March 27, 2025 | 3:08 pm GMT+7

S Korea chaebol Lotte eyes hypermarket in northern Vietnam

S Korea chaebol Lotte eyes hypermarket in northern Vietnam

South Korean conglomerate Lotte is eyeing projects in Thai Nguyen province, an industrial hub in northern Vietnam, firstly a hypermarket.

Industries - Thu, March 27, 2025 | 12:15 pm GMT+7

Dubai-based PDSI eyes $2.6 bln investment in tourism-golf course project in central Vietnam

Dubai-based PDSI eyes $2.6 bln investment in tourism-golf course project in central Vietnam

PDSI Group, a Dubai-based real estate and consulting firm, has expressed interest in developing a $2.6 billion commercial, tourism, and golf course complex in Binh Thuan, a south-central coastal province of Vietnam.

Real Estate - Thu, March 27, 2025 | 11:38 am GMT+7

S Korea's SK set to divest from Vietnam's giant Vingroup

S Korea's SK set to divest from Vietnam's giant Vingroup

South Korean chaebol SK Group is set to divest from Vietnamese conglomerate Vingroup, according to the former’s annual report 2024.

Companies - Thu, March 27, 2025 | 11:30 am GMT+7

StanChart adjusts USD/VND exchange rate forecast amid changing economic trends

StanChart adjusts USD/VND exchange rate forecast amid changing economic trends

Standard Chartered Bank has adjusted its USD/VND exchange rate forecast, reflecting shifts in global and regional economic conditions.

Economy - Thu, March 27, 2025 | 9:29 am GMT+7

Fund inflows help stabilize Vietnam's stock market: analyst

Fund inflows help stabilize Vietnam's stock market: analyst

As fund inflows are typically long-term investments, they play a key role in stabilizing Vietnam's stock market and preventing sharp fluctuations, according to Nguyen Duy Anh, Chartered Financial Analyst (CFA) at Vietcombank Fund Management Co., Ltd. (VCBF).

Finance - Thu, March 27, 2025 | 8:30 am GMT+7

VSIP begins work on industrial park project in northern Vietnam province Thai Binh

VSIP begins work on industrial park project in northern Vietnam province Thai Binh

Construction of the Vietnam-Singapore Industrial Park (VSIP) Thai Binh commenced on Wednesday in northern Vietnam, with the witness of Vietnamese Prime Minister Pham Minh Chinh and his Singaporean counterpart Lawrence Wong.

Industrial real estate - Wed, March 26, 2025 | 10:41 pm GMT+7

Vingroup starts building mega urban project in Vietnam's Mekong Delta

Vingroup starts building mega urban project in Vietnam's Mekong Delta

Vietnam’s leading private conglomerate Vingroup on Wednesday embarked on construction of the VND28 trillion ($1.1 billion) Vinhomes Green City, the first mixed-use urban development in its ecosystem in the Mekong Delta province of Long An.

Real Estate - Wed, March 26, 2025 | 10:11 pm GMT+7

Indonesia, China cooperate in digital technology

Indonesia, China cooperate in digital technology

Indonesia and China are expanding cooperation in the field of AI to promote digital transformation, especially in the fields of agriculture and smart cities.

Southeast Asia - Wed, March 26, 2025 | 10:01 pm GMT+7

Indonesia decides to join BRICS New Development Bank

Indonesia decides to join BRICS New Development Bank

Indonesian President Prabowo Subianto has announced the Government's decision to become a member of the New Development Bank (NDB), a multilateral development bank established by the five founding member states of the BRICS group.

Southeast Asia - Wed, March 26, 2025 | 9:57 pm GMT+7

Major Vietnamese broker SHS to double charter capital

Major Vietnamese broker SHS to double charter capital

Saigon-Hanoi Securities Corporation (SHS) plans to issue 894 million shares to increase its charter capital from VND8.13 trillion to VND17.07 trillion ($667.6 million), making it one of the top three securities firms in term of charter capital.

Companies - Wed, March 26, 2025 | 8:30 pm GMT+7