AEIR 2019/2020

  • Central Asia

    Armenia

    Growth dropped sharply from 7.5% in 2017 to 5.2% in 2018. On the supply side, agriculture contracted, while services and industry drove growth. On the demand side, private consumption and investment contributed most. Growth is projected to slow further to 4.3% in 2019, recovering slightly to 4.5% in 2020. Fiscal consolidation will limit capital outlays and thus any gains in public consumption and investment. However, private consumption and investment should receive a boost from expected increases in remittances and tax reforms implemented in 2019.
    Source: Asian Development Outlook 2019, ADB.

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    Azerbaijan

    Economic growth accelerated to 1.4% in 2018 from 0.1% in 2017. On the supply side, industry contracted by 0.4%, improving considerably on the 3.6% decline in 2017. A recovery in mining and a 7.9% growth in manufacturing largely offset a steep drop in construction. Agriculture expanded on government support to farmers, particularly for crop production, which rose by 6.8%. Growth in services remained at 3.5% with gains in tourism and transportation. On the demand side, 9 month data show a 12.0% rise in consumption, while net exports tripled. Growth is forecast to strengthen to 2.5% in 2019 and 2.7% in 2020 as gas production accelerates.
    Source: Asian Development Outlook 2019, ADB.

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    Georgia

    GDP growth continued to expand by 4.8% in 2018 due to rising exports and tourism, despite slower expansion in infrastructure projects and worsening regional volatility. On the supply side, industrial growth slowed sharply from 6.4% in 2017 to 2.3%—as a 2.5% decline in construction spending offset 4.1% growth in manufacturing and 10.8% in mining. Growth in services accelerated from 5.1% in 2017 to 5.9% on strong gains of 4.5% in trade, 17.9% in finance, and 9.8% in real estate. Agriculture rebounded from a 3.8% contraction in 2017 to 0.4% growth as better weather increased crop production. Growth is forecast to rise to 5.0% in 2019 on higher infrastructure spending, slowing marginally to 4.9% in 2020 as investment growth weakens slightly. Net exports, consumption, and investment are all expected to support growth in 2019 and 2020.
    Source: Asian Development Outlook 2019, ADB.

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    Kazakhstan

    Growth in several sectors slowed in 2018, while increased government spending resulted in a sustained 4.1% GDP expansion. With growth in both manufacturing and mining slowing, industrial growth fell to 4.2% from 7.7% in 2017. However, state support for housing, services and agriculture expanded further in 2018, supporting growth. Economic growth is forecast to decline to 3.5% in 2019 and 3.3% in 2020, mainly reflecting lower oil prices and slower GDP growth in both the People’s Republic of China and the Russian Federation. State non-oil investment may become a key driver of growth in the coming years.
    Source: Asian Development Outlook 2019, ADB.

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    Kyrgyz Republic

    Growth declined to 3.5% in 2018 from 4.7% in 2017 as a slowdown in gold mining and industry outweighed gains in textiles and apparel. On the demand side, growth was supported by higher public investment in energy and transport infrastructure projects, and from higher public and private consumption, the latter reflecting a 5.5% rise in remittances. The smaller fiscal deficit and higher GDP trimmed external government debt to 48.0% of GDP by end-2018 from 53.1% in end-2017. The current account deficit widened to 10.0% from 6.5% of GDP in 2017. As the domestic economy improves, especially gold production, and with the continued increase in remittances, growth is expected to recover to 4.0% in 2019 and 4.4% in 2020.
    Source: Asian Development Outlook 2019, ADB.

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    Tajikistan

    GDP grew by 7.3% in 2018, up from 7.1% in 2017. On the demand side, investment expanded by 7.8% as public infrastructure increased, largely offsetting a 40.2% decline of net exports. On the supply side, growth in industrial production decelerated to 21.3% due to a decline in aluminum production. Services, the key driver of growth, expanded by 2.1% on an increase in disposable income from higher remittances and government salaries. GDP growth is expected to moderate to 7.0% in 2019 and to 6.5% in 2020. Public infrastructure spending will slow following the completion of some projects in 2019. Remittances will continue to support GDP growth. Growth in production should remain robust, while exports should rise on improved relations with neighboring countries.
    Source: Asian Development Outlook 2019, ADB.

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    Turkmenistan

    GDP growth declined slightly from 6.5% in 2017 to 6.2% in 2018. On the supply side, the hydrocarbon industry expanded by 6.0%, well up from 1.7% in 2017. However, growth in the larger non-hydrocarbon economy slowed from 7.5% in 2017 to 6.2% in 2018. On the demand side, investment continued to drive growth despite a cut in government capital spending, supported by soaring export growth, due to the recovery of hydrocarbon prices and increased demand in gas from the People’s Republic of China. Growth in consumption weakened, especially private consumption, as inflation and a widening gap between the official and parallel exchange rate markets eroded real household incomes. Continued fiscal consolidation is forecast to slow growth to 6.0% in 2019 and 5.8% in 2020, but will be supported by further recovery in hydrocarbons.
    Source: Asian Development Outlook 2019, ADB.

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    Uzbekistan

    GDP growth accelerated from 4.5% in 2017 to 5.1% in 2018 on faster expansion in industry, construction, and investment. Industrial growth, excluding construction, doubled from 5.2% in 2017 to 10.6%, driven by increases in manufacturing, mining and quarrying. Construction expanded by 9.9%, up from 6.0% in 2017, with gains in housing and production facilities. Expansion in gross fixed capital formation jumped from 7.1% in 2017 to 18.1%, largely on higher investment in manufacturing, housing, energy, and mining—fueled by a 36.6% surge in FDI and fixed capital lending. Growth is forecast to rise to 5.2% in 2019 and 5.5% in 2020 due to higher infrastructure spending, an improved investment climate, expected gains in exports, and a pickup in agriculture.
    Source: Asian Development Outlook 2019, ADB.

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  • East Asia

    China, People's Republic of

    Economic growth slowed to 6.6% in 2018 in line with the government’s 6.5% target. Consumption remained the main driver of growth, supported by a rapid increase in government social spending, a cut in personal income tax rates, and solid growth in household disposable income. Despite trade tensions, external trade expanded in 2018 due to frontloaded orders mid-year. FDI inflows increased by 21.0% on more attractive investment conditions, while FDI outflows declined due to tighter controls. Growth is expected to decline to 6.3% in 2019 and 6.1% in 2020 as the government continues to contain financial sector risk.
    Source: Asian Development Outlook 2019, ADB.

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    Hong Kong, China

    GDP growth moderated to 3.0% in 2018 from 3.8% in 2017 on sluggish global trade, tightening external financial conditions, and persistent global trade tensions. Nonetheless, domestic demand remained resilient as a source of growth, while government spending also expanded by 4.2%. Spurred by favorable job and income conditions, private consumption expenditure expanded by 5.6% in real terms. GDP growth is projected to slow to 2.5% for both 2019 and 2020. Growth moderation in the People’s Republic of China and several other key partners will impact exports. Business surveys show a sharp deterioration in sentiment, particularly in import/export trade and wholesale markets, and in real estate, mirroring the recently cooling property market.
    Source: Asian Development Outlook 2019, ADB.

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    Japan

    Japan continued its recovery in 2018, with the economy expanding 0.8% on returning domestic demand. However, the Q1 and Q3 output contractions dragged annual growth down from the 2017 growth of 1.9%. Weakness in the all-important external sector caused the drop, with net exports slowing growth in the last 3 quarters, and by natural disasters that disrupted Q3 activity. Other recent indicators suggest the recovery in domestic demand is fragile, particularly in business investment. As trade tensions continue to threaten global trade and growth, and as domestic business sentiment wanes, the forecast for 2019 is a cautious 0.8% and 0.6% for 2020.
    Source: Asian Development Outlook 2019, ADB.

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    Korea, Republic of

    GDP grew by 2.7% in 2018, down from 3.1% in 2017—the slowest expansion in 6 years. The economy benefitted from a 5.6% growth in expenditures, which propped up government consumption and was the largest contributor to growth. Private consumption rose by 2.8% as a 16.4% hike in the minimum wage outweighed the impact of a 3.8% increase in the unemployment rate. Export growth in real terms doubled from 1.9% in 2017 to 4.0%, backed by strong semiconductor sales, information technology products, and petrochemicals. Nonetheless, investment slumped due to the uncertain trade environment. Contracting investment and moderating export growth—despite significant fiscal stimulus to sustain domestic demand and consumption—will pare GDP growth to 2.5% in 2019 and 2020.
    Source: Asian Development Outlook 2019, ADB.

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    Mongolia

    Mongolia’s economic growth accelerated to 6.9% in 2018 from 5.3% in 2017. The economy benefitted from a 55.8% rise in credit and rising demand for transport services for mineral exports. Mining recovered to moderate growth on stronger gold and coal production. Agriculture recovered from the 2017 drought, adding 0.9 percentage points to growth. GDP is expected to grow by 6.7% in 2019 and 6.3% in 2020. Domestic demand, fueled by more accommodative fiscal policy, will support 2019 growth. Mining-related FDI may not increase as much as last year, lowering its contribution to growth. Yet the downward pressure from net exports may ease as growth in exports outpaces import growth.
    Source: Asian Development Outlook 2019, ADB.

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    Taipei,China

    GDP growth moderated from 3.1% in 2017 to 2.6% in 2018 as export growth decelerated with softer external demand. Growth in exports to the People’s Republic of China and the US, its largest external markets, slowed to 8.8% and 7.5%, respectively, reducing total export growth to 5.9%. Growth was buoyed by domestic demand. Gross capital formation expanded by 6.1% in 2018, as public infrastructure investment accelerated and spurred private investment. Government consumption grew by 3.5% on election-related spending. On the supply side, growth in services rose marginally from 2.5% in 2017 to 2.6%, sustained by a 3.0% increase in tourist arrivals. Economic expansion is expected to moderate to 2.2% in 2019 and 2.0% in 2020, reflecting the impact of the global economic slowdown, trade tensions, and deteriorating business sentiment.
    Source: Asian Development Outlook 2019, ADB.

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  • Oceania

    Australia

    Economic growth moderated to 0.7% saar in the fourth quarter of 2018 from 1.1% the previous quarter. Consumption contributed 2.3 percentage points, with new inventory contributing 0.7 of a percentage point. This was countered by a decline in fixed capital formation and net exports, which subtracted 1.7 percentage points. FocusEconomics panelists forecast 2.7% GDP growth in 2019 and 2.6% in 2020, bolstered by sustained expansion in commodity exports and a stronger business environment, backed by favorable financing conditions.
    Source: Asian Development Outlook 2019, ADB.

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    New Zealand

    Economic expansion slowed from 4.4% saar in 2018Q2 to 1.9% in Q3 on weaker exports and a contraction in government consumption and fixed capital formation. Consumer optimism, a low policy interest rate, and moderate inflation continue to boost private consumption—seen through increased retail sales. Potential downside factors include a rise in unemployment, a projected slowdown in fixed investment under tighter financial conditions, and imminent changes to bank capital requirements. FocusEconomics panelists forecast growth at 2.7% in 2019, slowing to 2.5% in 2020, with exports expected to weaken in the near term as economic moderation in the People’s Republic of China reduces demand for dairy products, New Zealand’s major export.
    Source: Asian Development Outlook 2019, ADB.

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  • South Asia

    Afghanistan

    Economic growth slowed from 2.7% in 2017 to 2.2% in 2018. A devastating drought affected more than half the country, causing agricultural growth to decline from 3.8% to 2.0%. With the drought squeezing rural incomes, private consumption contracted, while business uncertainty slowed private investment. Public consumption and investment both increased slightly in 2018 on higher government expenditures. Net exports continued to dampen growth, aggravated by the re-imposition of international sanctions on neighboring Iran, one of Afghanistan’s main trade partners. GDP growth should recover to 2.5% in 2019 and 3.0% in 2020, as agricultural production normalizes, driving an expansion in industry and services.
    Source: Asian Development Outlook 2019, ADB.

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    Bangladesh

    GDP growth accelerated to 7.9% in FY2018 from 7.3% the previous year, as demand grew via higher consumption, investment, and exports. Continued political calm, improved power supply, and higher growth in private sector credit facilitated the fastest economic expansion in Bangladesh since 1974. GDP growth is expected to edge upward to 8.0% in FY2019 on robust private consumption, aided by the continued recovery in remittances. Public investment will remain strong as the government continues to expedite large infrastructure projects and other projects receiving overseas support. Private investment should also rise, supported by measures to increase private sector credit, reform initiatives to improve the ease of doing business, and plans to make several hundred industrial plots available in special economic zones. Despite a weaker growth outlook in key overseas markets, earnings from apparel exports are expected to rise as new destinations strengthen. GDP growth in FY2020 is expected to remain at 8.0% as economic momentum broadly continues.
    Source: Asian Development Outlook 2019, ADB.

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    Bhutan

    Estimates indicate GDP growth slowed from 6.3% in FY2017 to 5.5% in FY2018 on weaker industrial production. Construction remained an important growth driver despite the slowdown in hydropower projects, which cut the FY2017 9.8% expansion to 5.0%. Services grew a rapid 8.0% on robust expansion in wholesale and retail trade, hotels and restaurants, and transportation and communications. Revenue from international tourism rose by 5.0%. On the demand side, growth in consumption was a major contributor to sustaining growth, as private consumption grew markedly and government current spending remained robust. Growth will likely accelerate to 5.7% in FY2019 and 6.0% in FY2020. Services, particularly wholesale and retail business and tourism, will continue to drive the economy.
    Source: Asian Development Outlook 2019, ADB.

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    India

    Economic growth dipped in FY2018 to 7.0% from 7.2% in FY2017, mostly due to slower growth in agriculture, which grew by 2.7%—the slowest in 3 years. On the supply side, industry buoyed growth, rising sharply by 7.7% in FY2018 due to strong manufacturing, construction, and utilities. On the demand side, private consumption grew by 8.3%—its highest in 7 years. Domestic demand will remain the main driver of growth. Steps to alleviate agriculture distress—such as income support to farmers and strong hikes to procurement prices for food grains—may bolster rural demand. GDP growth should return to 7.2% in 2019 and rise slightly to 7.3% in 2020.
    Source: Asian Development Outlook 2019, ADB.

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    Maldives

    GDP growth jumped to an estimated 7.6% in 2018 from 6.9% in 2017 on an expansion in tourism, construction, and supporting services. While growth in tourist arrivals slowed from 8.0% in 2017 to 6.8% in 2018, revenues grew by 10.3% as the average stay lengthened to 6.4 days. Moreover, growth in tourist goods and services tax revenues accelerated to 11.4%, reflecting strong income growth for both the government and resorts. Rising demand from public and private infrastructure projects—and credit growth—boosted construction growth. Tourism and construction will continue to drive growth in 2019 and 2020, projected at 6.5% and 6.3%, respectively.
    Source: Asian Development Outlook 2019, ADB.

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    Nepal

    Economic growth decelerated to 6.3% in FY2018 from 7.9% in FY2017. Despite devastating earthquakes and trade disruptions, growth momentum continued on robust growth in domestic spending. Construction grew by 10.6%, bolstered by government capital spending and accelerated post-earthquake reconstruction. Manufacturing expanded by 8.0%, benefitting from more and better electricity supply. Services increased by 6.6% as tourism increased amid normalized economic activity. GDP should grow by 6.2% in FY2019 and 6.3% in FY2020. Services will remain the key driver of growth, supported by wholesale and retail trade, hotels and restaurants, and finance. Industrial production should rise as manufacturing firms reach capacity given improvements in existing plants. On the demand side, higher public infrastructure spending, buoyant government recurrent spending, and remittance-driven private consumption will contribute to growth.
    Source: Asian Development Outlook 2019, ADB.

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    Pakistan

    Despite a rise in agricultural production, the GDP growth forecast for FY2018 was downgraded from 5.8% to 5.2% on weaker growth in manufacturing, a slowdown in construction, and deceleration in services growth. On the demand side, private consumption contributed most, buoyed by low inflation and interest rates. Higher public investment in infrastructure and energy were also major contributors. However, growth is expected to decelerate to 3.9% in FY2019 and 3.6% in FY2020 as macroeconomic challenges remain—specifically high and unsustainable government deficits that require more fiscal consolidation.
    Source: Asian Development Outlook 2019, ADB.

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    Sri Lanka

    Despite the recovery in agriculture and improved services, growth fell slightly to 3.2% in 2018 from 3.4% in 2017 as industry slowed and manufacturing weakened. Export earnings expanded by 4.7% in 2018. Industrial exports grew by 8.4% and agricultural exports declined by 6.8%—across all major agriculture export categories. Growth should recover moderately to 3.6% in 2019 and 3.8% in 2020. Assuming normal weather, agriculture is expected to continue recovering over the next 2 years. Tea and marine fishing, both large contributors to agriculture, will lead the recovery in 2019, while industry will pick up gradually over the forecast period, reversing the 2018 slowdown. Construction is expected to show some marginal growth this year.
    Source: Asian Development Outlook 2019, ADB.

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  • Southeast Asia

    Brunei Darussalam

    GDP estimates show a 1.0% contraction in 2018 from 1.3% growth in 2017. Despite higher prices, oil and gas production, which accounts for roughly two-thirds of GDP, may have also contracted as crude oil output declined by 1.5%, natural gas and liquefied natural gas by 3.0% each. Other sectors also declined by 0.8% in the first 3 quarters of 2018. Lower prospects for oil prices and a weakening external environment temper growth expectations. However, the start of downstream production at the Hengyi refinery and construction on the Brunei Fertilizer Industries plant and Temburong Bridge may stimulate growth until year’s end. GDP growth should reach 1.0% in 2019 and 1.5% in 2020.
    Source: Asian Development Outlook 2019, ADB.

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    Cambodia

    Economic growth in 2018 reached 7.3% on a hefty increase in exports, buoyant tourism, and continuing strong FDI inflows. The dollar value of goods and services exports rose from 10.7% in 2017 to an estimated 18.3% in 2018. The value of merchandise exports also expanded by 18.3%, almost double the 9.3% growth in 2017. International tourist arrivals rose by 10.7% as visitors from the People’s Republic of China (PRC) surging 70.0% after a 45.9% increase in 2017. Growth in FDI inflows edged up from 12.6% in 2017 to an estimated 13.0%. Slower growth forecasts for advanced economies and the PRC—major destinations for Cambodia’s exports—will likely soften prospects for both exports and tourism arrivals. GDP growth should moderate to 7.0% in 2019 and 6.8% in 2020.
    Source: Asian Development Outlook 2019, ADB.

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    Indonesia

    GDP growth accelerated slightly from 5.1% in 2017 to 5.2% in 2018, the fastest since 2013. Stronger domestic investment and robust domestic consumption more than offset weaker export growth. Private spending sustained growth supported by the continued increase in household income due to a robust increase of formal employment. On the supply side, robust growth in services and an accelerated expansion in industrial production led GDP growth, while agriculture remained stable. GDP growth is expected to stay at 5.2% in 2019 and increase slightly to 5.3% in 2020. While weakening global growth and world trade are downside risks to export growth, GDP growth will be supported by domestic demand.
    Source: Asian Development Outlook 2019, ADB.

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    Lao PDR

    Economic growth slowed to 6.5% in 2018 from 6.9% in 2017. Expansion in most industrial sectors fell. Growth in agriculture and allied activities declined due to severe floods. Meanwhile, growth in services remained robust due to tourism, which saw an 8.2% growth in international tourist arrivals. Economic growth is projected to remain at 6.5% for both 2019 and 2020. The growth slowdown in advanced economies and the country’s major trading partners are downside risks to growth. However, this can be offset by rebounding agricultural growth and accelerating electricity generation as new power plants come on stream. Cross-border expressway and railway construction will support public investment. Tourism will continue to post robust growth, given the continued rise in the number of international visitors.
    Source: Asian Development Outlook 2019, ADB.

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    Malaysia

    Despite a significant drop in external demand and domestic investment, GDP grew 4.7% in 2018. Strong domestic consumption was buoyed by higher wages, a temporary tax holiday and increase in cash transfers to lower-income households. GDP growth will likely slow to 4.5% in 2019 due to expected weak external demand from slower growth in advanced economies and a moderation in global electronics trade. GDP growth will bounce back to 4.7% in 2020. A new refinery and petrochemical complex at Pengerang—with the capacity to process 300,000 barrels of crude per day should—be operational by the end of 2019. The complex is expected to attract additional private investment to the Pengerang area.
    Source: Asian Development Outlook 2019, ADB.

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    Myanmar

    GDP growth slowed from 6.8% in FY2017 to 6.2% year-on-year during the transitional fiscal year (TFY) 2018—from 1 April 2018 to 30 September 2018—due to weaker domestic demand and slower investments. Domestic investment was sluggish, due to slower disbursement of government expenditure, weaker investor sentiment, and a decline in FDI approvals. The current account deficit fell by more than half, from the equivalent of 4.7% of GDP in FY2017 to 2.0% in TFY2018. Growth is forecast to rise to 6.6% in FY2019 (the full year ending 30 September 2019) and 6.8% in FY2020. A weakening external environment may hurt export prospects, but domestic and foreign investment should improve in response to the opening up of FDI in retail and wholesale trade, and insurance.
    Source: Asian Development Outlook 2019, ADB.

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    Philippines

    Economic growth declined to 6.2% in 2018 from 6.7% in 2017. On the demand side, robust private consumption growth, an accelerated increase in domestic investment, and higher government social expenditures supported economic growth. These largely offset a rapid expansion in imports and slowdown in export growth. On the supply side, services and industry propelled growth, with agriculture subdued by the crop damage caused by several typhoons. The economy is projected to expand by 6.4% in both 2019 and 2020, buoyed by private consumption and domestic investment. A low unemployment rate, sustained remittance growth, and relatively low inflation should boost private consumption. Major public infrastructure projects will drive domestic investment.
    Source: Asian Development Outlook 2019, ADB.

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    Singapore

    GDP growth moderated from 3.9% in 2017 to 3.2% in 2018 as expansion in manufacturing and services slowed and domestic demand weakened. Services contributed 2.1 percentage points to growth. In April 2018, the Monetary Authority of Singapore tightened monetary policy, allowing the Singapore dollar to appreciate by 0.8% in nominal effective terms and by 2.3% against the US dollar in nominal terms. The trade surplus widened and current account surplus rose to reach the equivalent of 17.7% of GDP. Economic growth is expected to moderate further to 2.6% in 2019 and 2020 as the global growth slowdown and trade tensions affect manufacturing and export-oriented services.
    Source: Asian Development Outlook 2019, ADB.

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    Thailand

    Despite weaker export growth, GDP growth rose marginally from 4.0% in 2017 to 4.1% in 2018 on higher domestic demand. By volume, export growth moderated from 5.4% in 2017 to 4.2% in 2018. By US dollar value, merchandise export growth fell from 9.8% in 2017 to 7.7% as external demand softened. While lower prices caused a 23.6% reduction in earnings from rubber exports, a slowdown in global electronics trade helped drag manufacturing export growth down from 10.2% in 2017 to 8.4%. GDP growth is expected to decline to 3.9% in 2019 and 3.7% in 2020. Although domestic consumption and investment should hold up, slowing global growth and trade tensions will dim export prospects.
    Source: Asian Development Outlook 2019, ADB.

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    Viet Nam

    Strong exports and domestic demand pushed GDP growth to 7.1% in 2018, the highest in 11 years. Private consumption, the largest component of GDP, accounted for most of the expansion. Rising incomes and stable inflation underpinned a strong rise in private consumption. Inflation averaged 3.5% in both 2017 and 2018, below the official 4.0% target. A weaker external environment should moderate economic expansion to 6.8% in 2019 and 6.7% in 2020. Growth will continue to be broad-based, underpinned by export-oriented manufacturing, inward FDI, and sustained domestic demand. Given its strong external linkages, small and medium-sized enterprises need to upgrade their capacity to benefit from better integration into global value chains.
    Source: Asian Development Outlook 2019, ADB.

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  • The Pacific

    Cook Islands

    Economic growth accelerated to 7.0% in FY2018, thanks to sustained growth in tourism. Retail trade, hotels and restaurants, and transport and communications also contributed, mostly due to tourism spillovers. Construction grew by 25% as projects for renewable energy, water supply and sanitation were implemented. However, fishing, finance, and health care saw a decline in output. Economic expansion should decelerate to 6.0% in FY2019 and 4.5% in FY2020 as limited tourist accommodation constrains growth, despite new infrastructure projects and improved internet connectivity.
    Source: Asian Development Outlook 2019, ADB.

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    Fiji

    The economy grew by 3.0% in 2018 on continued growth in tourist arrivals and contributions from agriculture, forestry, and construction. Visitor arrivals increased by 3.3%, boosting tourism earnings to 20% of GDP and boosting employment. Sugarcane production increased, but cane quality suffered and milling efficiency declined. Timber harvested from pine and mahogany plantations rose substantially. Private construction grew strongly in 2018 with new construction augmenting maintenance and repair. Growth is projected to improve to 3.2% in 2019 and 3.5% in 2020. All sectors are expected to grow, with tourism continuing to lead and construction contributing substantially.
    Source: Asian Development Outlook 2019, ADB.

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    Kiribati

    The economy grew at a slower pace in 2018, to 2.3%, compared with the previous 3-year 5.2% average. This was due to a significant slowdown in fishing revenue growth—from 10.0% in 2017 to 0.7% in 2018. On the positive side, public spending and development partner projects helped compensate. The Kiribati economy will likely grow 2.3% in 2019 and 2020, as continued infrastructure spending offsets the slowdown in fishing revenue growth. In October 2018, Kiribati secured a grant from development partners that will provide South Tarawa, the capital, a seawater desalination plant and a solar photovoltaic plant, as well as rehabilitate and expand the water supply network.
    Source: Asian Development Outlook 2019, ADB.

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    Marshall Islands

    Economic growth slowed from 3.6% in FY2017 to 2.5% in FY2018 as capacity constraints impeded infrastructure construction on investment projects funded by development partners and US compact grants. The current account surplus widened from 3.7% of GDP to 7.0% as imports slowed due to project implementation delays. Subdued economic activity kept inflation in check at 0.7% in FY2018. Growth is projected to continue slowing to 2.3% in FY2019 and 2.2% in FY2020 as local constraints limit the room for stimulus. The government plans to issue a cryptocurrency in mid-2019, posing a potentially significant downside risk to growth.
    Source: Asian Development Outlook 2019, ADB.

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    Micronesia, Federated States of

    In March 2018, tropical depression Jelawat brought flooding and landslides to Pohnpei, damaging roads and other critical infrastructure. Reconstruction stimulus partly offset the disaster’s economic impact, keeping FY2018 growth fairly solid at 2.0%, albeit down from 2.4% in FY2017. Administrative support from the US helped overcome some constraints on implementation capacity. GDP growth is projected to rise to 2.7% in FY2019 as capital spending increases in accordance with the Infrastructure Development Plan, FY2016–FY2025. More growth could come from greater consumption on expectations of lower fuel prices and stable prices for imported food. Growth is projected to taper slightly to 2.5% in FY2020 as some capital projects near completion.
    Source: Asian Development Outlook 2019, ADB.

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    Nauru

    The economy contracted 2.4% in FY2018 as the Regional Processing Centre (RPC), an Australian-funded facility for asylum seekers, scaled down operations. The facility has been the principal source of economic activity in recent years, providing revenue streams from visa fees, taxes paid by expatriate workers, demand for local services and infrastructure. Phosphate exports remained weak. The economy is forecast to decline by 1.0% in FY2019—less than the 2018 contraction—as the refurbishment of Nauru Port gears up. In FY2020, the economy is expected to grow 0.1% on the buildup of cash buffers and previous revenue from fishing licenses. However, revenue from the RPC remains uncertain and with fishing license fees projected to drop.
    Source: Asian Development Outlook 2019, ADB.

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    Palau

    The economy recovered from a steep 3.7% contraction in FY2017 to 0.5% growth in FY2018 on increased public and private investments. Growth would have been stronger if a nascent rebound in tourism had not been cut short by the May termination of a US-connected flight from Tokyo and the indefinite suspension of Palau Pacific Airways charter flights from Hong Kong, China. Visitor arrivals grew by 6.6% in the first half of FY2018, but declined sharply in the second half. Growth in FY2019 and FY2020 is projected to accelerate to 3.0% with expectations of a recovery in tourism and further increases in capital expenditures, boosted by greater US financial assistance.
    Source: Asian Development Outlook 2019, ADB.

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    Papua New Guinea

    The large February 2018 earthquake undermined economic growth, which is estimated at 0.2%. The impact was mitigated somewhat by higher commodity prices, activity associated with the November 2018 APEC summit in Port Moresby, and earthquake reconstruction. Growth is projected to rebound to 3.7% in 2019 and 3.1% in 2020 full year production of gold, LNG, oil, and condensate returns. LNG production is forecast to expand by 9%-16% in 2019. Condensate and oil production are similarly expected to rebound in 2019, though oil production is declining and condensate is forecast to start falling by 2020. Gold output should expand in 2019 as the Porgera mine enjoys uninterrupted operations.
    Source: Asian Development Outlook 2019, ADB.

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    Samoa

    GDP growth fell from 2.7% in FY 2017 to 0.9% in FY2018 as a large manufacturing enterprise closed and fishing production declined. However, the steep drop in nonfood manufacturing was offset by growth in hotels and restaurants, construction, and communications and business services. Visitor arrivals grew by 11.5%, well above the 1.9% average annual tourism growth in FY2010–FY2017. Agriculture, transport, and finance all declined. Growth is expected to accelerate to 2.0% in FY2019 and 3.0% in FY2020 due to increased tourism, which should boost commerce, hotels, transport, and other ancillary activities. The 2019 Pacific Games, which Samoa will host in July 2019, is expected to provide further impetus.
    Source: Asian Development Outlook 2019, ADB.

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    Solomon Islands

    Economic growth is estimated to have slowed slightly, from 3.2% in 2017 to 3.0% in 2018. Higher volumes and global prices boosted the value of log exports by more than 25.0%. Exports of minerals and fish grew 29.9% and 15.1%, respectively. However, most crop exports declined in 2018, with copra and coconut oil falling most. Growth in services slowed to 3.5% in 2018, while domestic trade decelerated due to lower cash-crop output and higher taxes. Due to significantly reduced cash reserves, the government is concentrating on restoring fiscal stability, and thus slowed growth in government spending with substantial reductions in development expenditures. GDP growth is projected to slow to 2.4% in 2019 and 2.3% in 2020. Logging should slow, but be partly offset by construction on large infrastructure projects.
    Source: Asian Development Outlook 2019, ADB.

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    Timor-Leste

    Reduced public spending in 2018 caused a 0.5% contraction in GDP, excluding the large offshore petroleum sector. Following a sharp decline in 2017, public expenditure (excluding off-budget grants from development partners) fell another 2.8% in 2018. While public capital investment increased significantly, it was more than offset by lower recurrent spending. Payments for salaries and wages fell by 2.2%, purchases of goods and services by 9.3%, and transfer payments by 23.9%. These reflect lower payments to the Special Administrative Region of Oe-Cusse Ambeno. GDP is forecast to grow by 4.8% in 2019 and 5.4% in 2020, as fiscal stimulus and renewed investor confidence help stoke growth.
    Source: Asian Development Outlook 2019, ADB.

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    Tonga

    Economic growth was 0.4% in FY2018, well below the 3.2% average posted from FY2015 to FY2017. The destruction of crops, public infrastructure, and buildings inflicted by Cyclone Gita constrained growth. However, post-cyclone recovery and reconstruction avoided a contraction of the Tongan economy. GDP is expected to grow by 2.1% in FY2019 and 1.9% in FY2020, largely supported by reconstruction and spending on planned infrastructure projects. These will be financed through fiscal spending and are thus projected to increase the government budget deficit. However, higher tax revenues should help narrow the fiscal deficit by FY2020.
    Source: Asian Development Outlook 2019, ADB.

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    Tuvalu

    Growth accelerated from 3.2% in 2017 to 4.3% in 2018, driven by higher government spending on large infrastructure projects—new housing for the June 2018 Polynesian Leaders Group Summit and the upcoming September 2019 Pacific Islands Forum. The increased spending was supported by a recovery in fishing license revenue, which jumped 84.8% in 2018, with the receipt of a one-off 2018 payment from a subregional pooling scheme. Growth is projected to accelerate to 4.1% in 2019 and 4.4% in 2020 on the implementation of infrastructure projects supported by development partners. However, weaker fishing revenue over the next 2 years and sustained import growth will push the current account into deficit in 2019 and further in 2020.
    Source: Asian Development Outlook 2019, ADB.

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    Vanuatu

    Economic growth dropped from 4.4% in 2017 to 3.2% in 2018 due to a sharp decline in agriculture—caused by Cyclone Hola and a volcanic eruption on Ambae Island. Low prices for copra exacerbated a decline in output. Growth in 2018 was buoyed by services, where growth increased from 2.9% in 2017 to 3.6% in 2018 as tourism accelerated. Travel and tourism are estimated to have contributed 45% of GDP in 2018. Industrial growth remained strong as construction continued on major infrastructure projects—facilities to complement newly upgraded wharves in Port Vila and Luganville, rehabilitation of the main airport in Port Vila, outer islands airports, and road projects on multiple islands. Growth is expected to moderate to 3.0% in 2019 and 2.8% in 2020. Tourism should remain strong, but construction will likely contract with the completion of major infrastructure projects.
    Source: Asian Development Outlook 2019, ADB.

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