MANILA -- Growth prospects for Developing Asia have held up despite global headwinds hounding the region's economic outlook, the Asian Development Bank said on Tuesday.
Based in Manila, the ADB classifies 45 of its 67 member countries as Developing Asia. In its Asian Development Outlook Update, the ADB said the region is expected to grow at 5.7% in 2016 and 2017, unchanged from its forecasts in March. The region grew 5.9% last year.
"Stymied recovery in the major industrial economies, and drag from slower growth in the U.S. in particular, has been counteracted by policy-supported domestic demand so far this year in some large economies in the region," the ADB said.
China and India, the region's largest economies, would sustain the region's growth path through next year, buoyed by "an improving external environment and resilience."
China is forecast to grow at 6.6% this year, faster than initially expected, as government stimulus fuels consumption and offsets weak exports. "Private consumption and services generated most of the growth in line with government objectives favoring sustainable growth supported by solid wage growth and urban job creation."
The ADB hiked its forecast for the broader East Asian subregion as China's "surprisingly fast growth" took up the slack from sluggish neighbors.
"Faltering domestic demand will deepen growth moderation in Hong Kong and China, while tepid domestic demand and persistent export weakness weigh on prospects for Taipei and China," the ADB said.
Southeast Asia is on track to grow at 4.5% in 2016 as better-than-expected results in Thailand and the Philippines offset the downward revisions in Indonesia, Malaysia, Singapore and Vietnam.
"Government infrastructure investment is a key contributor to growth in Indonesia, the Philippines, Singapore and Thailand," the report said.
South Asia is likewise projected to grow as expected, with India gaining vitality from strong private consumption on the back of increases in government wages and pensions.
Central Asia is expected to weaken more than originally forecast as oil and gas prices continue to hurt the region's energy-exporting economies. "Depressed oil and gas prices and low external demand have weakened these economies, as have lower remittances in others, requiring cuts in public investment while limiting increases in social transfers."
Pacific economies are also growing slower than expected due to Papua New Guinea's fiscal contraction.
Risks to Developing Asia's growth outlook, the ADB said, have tilted to the downside. The external environment remains fragile as Japan, the U.S. and the euro area recover at a slower pace and an impending interest rate hike by the U.S. Federal Reserve could disrupt capital flows and complicate macroeconomic management.
"Political pressures against openness could jeopardize the progress made toward free trade and regional integration," the ADB said. Private debt is also rising, and natural disasters are becoming more unpredictable, further hampering prospects.