Abstract

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Growth is slowing in many developing countries in Asia as a result of the continued weak recovery in major industrial economies and softer growth prospects for the People’s Republic of China.

Modest recovery in Southeast Asia and sustained growth in India will partly offset continued moderation in the People’s Republic of China and the associated spillover into neighboring economies. Risks to the growth outlook tilt to the downside: future US interest rate hikes that may intensify global financial volatility; a sharper-than forecast growth slowdown in the People’s Republic of China that would hurt regional exports and growth; emerging producer price deflation that may undermine growth in some economies; tepid prices for oil and other commodities; and El Niño.

This edition of the ADO highlights the need to invigorate developing Asia’s potential growth, whose decline since its peak explains much of the region’s growth slowdown since the global financial crisis. To ensure a healthy future for potential growth, Asia must employ the full range of policy responses to augment labor supply, improve labor productivity, enhance institutional quality, and maintain macroeconomic stability.​