ADB sees resilient growth in developing Asia, warns of tariff headwinds

MANILA: The Asian Development Bank forecast a slight improvement in its growth outlook for developing Asia and the Pacific for this year, reflecting robust expansion in the first half, but trade headwinds continue to cast a shadow over expectations.

Growth in 2025 is now projected at 4.8%, up slightly from 4.7% in July, the ADB said it an update to its Asian Development Outlook, but it remains below the 4.9% forecast made when the report was first released in April.

The ADB defines developing Asia and the Pacific as 46 economies ranging from China to Georgia to Samoa, and excluding countries such as Japan, Australia and New Zealand.

Developing Asia grew 5.4% in the first half of 2025, faster than the 4.9% expansion in the second half of 2024, driven by the front loading of exports of electronics and artificial intelligence-related goods to head off the higher tariffs.

“Front loading ahead of tariff hikes boosted growth in some economies this year, but this momentum is expected to fade as tariff hikes come into full effect,” ADB Chief Economist Albert Park said at a press briefing.

The ADB trimmed is growth projection for the region in 2026 to 4.5%, compared with 4.6% in July and 4.7% in April, citing the drag from higher U.S. tariffs on external demand.

“Trade risks pose the main threats to the outlook,” Park said, pointing to unresolved U.S.–China trade tensions, the risk of further tariff hikes, and sector-specific duties on semiconductors and pharmaceuticals.

The average effective U.S. tariff rate has jumped to 17.4%, the highest since the Great Depression of the 1930s, from 2.4% in 2024, after new duties took effect in August, the ADB said.

While Washington has signed several new trade agreements, many remain incomplete, fuelling policy uncertainty.

“Uncertainty eased after trade deals were announced in May to August, but it remains elevated. This reflects lack of clarity on the implementation of trade deals and other expected tariffs,” Park said.

Subregional prospects remain mixed. The ADB now expects Southeast Asia to grow 4.3% this year, up slightly from its 4.2% forecast in July, but below the 4.7% projection in April.

South Asia is forecast to grow 5.9% this year, unchanged from July, but below ADB’s 6.0% estimate in April.

China’s outlook is unchanged at 4.7% this year, supported by policy measures, export diversification, and strong first-half growth of 5.3%, the ADB said. Even so, the projection remains below Beijing’s target of 5.0%.

Inflation is forecast to ease to 1.7% in 2025, from 2.3% in April, before rising slightly to 2.1% in 2026 as food prices normalize, the ADB said.