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The annual Asian Development Outlook, now in its 30th year, analyzes economic performance in the past year and forecasts performance in the next 2 years for the 45 economies in Asia and the Pacifi c that make up developing Asia.

Growth prospects in developing Asia remain strong despite persistent external headwinds responsible for moderating expansion since 2017. Global trade and economic activity weakened toward the end of 2018, slowing growth in many economies in the region. The outlook is cloudy with risks that tilt to the downside:

A drawn-out trade conflict could undermine trade and investment in the region, and US fiscal policy and the consequences of a disorderly Brexit could weigh on growth in the advanced economies and the People’s Republic of China. Though the risk of sharp increases in US interest rates has subsided, policy makers must stay vigilant.

Disasters are shaped by natural hazards and the dynamics of the economy, society, and environment in which they occur. They pose a growing threat to development and prosperity in the region, their consequences disproportionately severe in developing countries, especially for the poor and marginalized. As developing Asia is home to more than four-fi fths of the people a ected by disasters globally in the past 2 decades, the region must strengthen its disaster resilience. This means integrating disaster risk reduction into national development and investment plans, spending more on prevention for a better balance with spending on rescue and recovery, and pooling risk through insurance and reinsurance.

Foreword

Despite increasing headwinds, developing Asia posted strong growth in 2018, albeit moderating from 2017. Growth in the region is projected to soften to 5.7% in 2019 and 5.6% in 2020. Excluding Asia’s high-income newly industrialized economies, growth is expected to slip from 6.4% in 2018 to 6.2% in 2019 and 6.1% in 2020.

As oil prices rose and Asian currencies depreciated, inflation edged up last year but remained low by historical standards. In light of stable commodity prices, inflation is anticipated to remain subdued at 2.5% in both 2019 and 2020.

Risks remain tilted to the downside. A drawn-out or deteriorating trade conflict between the People’s Republic of China and the United States could undermine investment and growth in developing Asia. With various uncertainties stemming from US fiscal policy and a possible disorderly Brexit, growth in the advanced economies could turn out slower than expected, undermining the outlook for the People’s Republic of China and other economies in the region. Though abrupt increases in US interest rates appear to have ceased for the time being, policy makers must remain vigilant in these uncertain times.

Disaster risk from natural hazards is a growing threat to the development and prosperity in the region, and the consequences tend to be more severe in developing countries affecting poor and marginalized people disproportionally. Home to more than four-fifths of the people affected by disasters globally in the past 2 decades, developing Asia must prioritize strengthening its disaster resilience. Governments should integrate disaster risk reduction into national development and investment plans. Spending more on prevention would bring a better balance with spending on response and provide better protection to people at risk. Pooling risk through insurance and reinsurance promises to be cost-efficient.

TAKEHIKO NAKAO

President

Asian Development Bank