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Fostering Growth and Inclusion in Asia’s Cities Growth in developing Asia remains robust despite expected moderation. A slowing trend continued in
the first half of 2019 in most regional economies, especially the wealthier newly industrialized economies
and the People’s Republic of China, as shrinking global trade and declining investment constrained growth.
Inflation remains benign, but pressure is building slightly as food prices rise.
Downside risks to the outlook have intensified. Trade tensions between the United States and the People’s
Republic of China could escalate further or even spread beyond trade and these two economies, the
world’s largest. The risk of deeper malaise in the global economy, and uncertainty over how policy makers
around the world will respond to weaker global growth, may stoke volatility in global financial markets.
Proliferating private debt in some Asian economies could pose another challenge to financial stability. ASIAN DEVELOPMENT OUTLOOK 2019 UPDATE Fostering Growth and Inclusion in Asia’s Cities Developing Asia is urbanizing rapidly. This Update highlights how urbanization can foster economic growth
and inclusion in Asia’s cities. To enjoy the economic benefits of agglomeration, cities must function well as
labor markets, which requires sound urban planning, efficient public transport, and affordable housing.
As cities expand over municipal boundaries and become more connected with one another through flows of
goods, services, and people, better planning coordination is needed at all levels of government. About the Asian Development Bank
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific,
while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members
—49 from the region. Its main instruments for helping its developing member countries are policy dialogue,
loans, equity investments, guarantees, grants, and technical assistance. ASIAN DEVELOPMENT OUTLOOK 2019
UPDATE FOSTERING GROWTH AND INCLUSION IN ASIA’S CITIES
SEPTEMBER 2019 ISBN 978-92-9261-560-4 ASIAN DEVELOPMENT BANK
6 ADB Avenue, Mandaluyong City
1550 Metro Manila, Philippines
ASIAN DEVELOPMENT BANK ASIAN DEVELOPMENT OUTLOOK 2019
UPDATE FOSTERING GROWTH AND INCLUSION IN ASIA’S CITIES
SEPTEMBER 2019 ASIAN DEVELOPMENT BANK Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO)
© 2019 Asian Development Bank
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Some rights reserved. Published in 2019.
ISBN 978-92-9261-752-3 (print), 978-92-9261-753-0 (electronic)
Publication Stock No. FLS190445-3
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In this publication, “$” refers to US dollars.
ADB recognizes “China” as the People’s Republic of China and “Vietnam” as Viet Nam.
Cover design by Anthony Victoria. Contents
Foreword Acknowledgments Definitions Abbreviations ADO 2019 Update—Highlights Part 1 Asia girds for prolonged uncertainty 1.1Challenges to Asia’s growth 1.2Debt buildup and financial vulnerability: Evidence from emerging
markets through trade and financial channels Annex: A worsening global environment Part 2 Fostering growth and inclusion
in Asia’s cities 2.1Urbanization in developing Asia 2.2The city as a labor market 2.3Managing the urban system 2.4The promise of cities Part 3 Economic trends and prospects
in developing Asia Central Asia East Asia South Asia Southeast Asia The Pacific Statistical appendix Foreword
Growth in developing Asia remains robust but is now expected to
moderate more than forecast in Asian Development Outlook 2019.
This Update projects that the region will grow by 5.4% this year, or
0.3 percentage points below the April forecast, and that growth will
edge up to 5.5% next year, or 0.1 points lower than earlier forecast.
Excluding high-income newly industrialized economies, the region is
expected to grow by 6.0% this year and next. Inflation should pick up
slightly but remain subdued.
Downward revisions to the regional growth outlook stem largely
from escalating trade tensions, which have affected in particular the
more open economies of East and Southeast Asia. Also dampening the
growth outlook are deteriorating prospects in the advanced economies
and declining investment in developing Asia. In Central Asia and the
Pacific, however, increased public spending should support growth
higher than forecast in April.
Downside risks to the region’s prospects have intensified. The
trade conflict may yet intensify, possibly moving beyond tariffs.
Evidence already shows it reshaping trade patterns, supply chains,
and foreign investment. This Update also notes a buildup over the past
decade of debt in the region, both public and private, that could erode
financial stability and render economies more vulnerable to shocks.
Taking a longer view, this Update examines the growing
importance of cities in developing Asia. It highlights rapid
urbanization in the region and its potential to deliver sustained
income and job growth. To function well as labor markets and
fulfill their promise, cities need to upgrade their transport systems,
plan urban expansion better, and enlarge the supply of adequate
and affordable homes. Crucially, cities need to ensure that they are
environmentally sustainable. ADB is ready to work with public and
private stakeholders alike to harness the potential of cities toward
advancing regional development goals. TAKEHIKO NAKAO
Asian Development Bank Acknowledgments
Asian Development Outlook 2019 Update was prepared by staff of Asian
Development Bank (ADB) regional departments and resident missions under
the guidance of the Economic Research and Regional Cooperation Department
(ERCD). Representatives of these departments met regularly as the Regional
Economic Outlook Task Force to coordinate and develop consistent forecasts for
Economists in ERCD, led by Abdul Abiad, director of the Macroeconomics
Research Division, coordinated the production of the publication, assisted by
Edith Laviña. Technical and research support was provided by Shiela CamingueRomance, Cindy Castillejos-Petalcorin, Nedelyn Magtibay-Ramos, Rhea Manguiat
Molato, Pilipinas Quising, Dennis Sorino, Priscille Villanueva, and Mai Lin
Villaruel. Additional research support was provided by Ann Jillian Adona,
Emmanuel Alano, Rosa Mia Lasam Arao, Zemma Ardarniel, Kristina Baris,
Donald Jay Bertulfo, Janine Elora Lazatin, Jesson Pagaduan, Reizle Jade
Platitas, Rene Cris Rivera, and Michael Timbang. Support from Mahinthan J.
Mariasingham on the use of the ADB Multi-Region Input-Output Database is
much appreciated. Economic editorial advisors Robert Boumphrey, Joshua Greene,
Henry Ma, Srinivasa Madhur, Richard Niebuhr, and Reza Vaez-Zadeh made
substantive contributions to country chapters and the regional outlook.
A team of economists prepared the theme chapter, led by Rana Hasan, director
of the Economic Analysis and Operational Support Division of ERCD. In addition
to contributors named in the byline and authors of background papers, the
theme chapter benefited from valuable feedback and inputs from Abdul Abiad,
Lara Arjan, Bruce Dunn, Hideaki Iwasaki, Robert Guild, James Leather, Thiam
Hee Ng, Thomas Panella, Stefan Rau, Norio Saito, Sonia Sandhu, Manoj Sharma,
Ramola Naik Singru, Lei Lei Song, Robert Valkovic, Joris van Etten, and
Jian Zhuang. Support and guidance from Yasuyuki Sawada, Joseph E. Zveglich,
Jr., and Edimon Ginting throughout production is gratefully acknowledged.
Renard Teipelke provided editorial advice on the theme chapter. Infographics
were created by Rhommell Rico, and map illustrations by Abraham Villanueva and
Authors who contributed sections are bylined in each chapter. Subregional
coordinators were Kenji Takamiya, Lilia Aleksanyan, and Fatima Catacutan for
Central Asia, Akiko Terada-Hagiwara for East Asia, Lei Lei Song for South Asia,
Thiam Hee Ng and Dulce Zara for Southeast Asia, and Rommel Rabanal and
Cara Tinio for the Pacific.
Peter Fredenburg advised on ADB style and English usage. Alvin Tubio
handled typesetting and graphics generation, assisted by Heili Ann Bravo, Elenita
Pura, and Priscille Villanueva. Art direction for the cover was by Anthony
Victoria. Critical support for printing and publishing the report came from
the Printing Services Unit of the ADB Office of Administrative Services and
the publications and web teams of the ADB Department of Communications.
Fermirelyn Cruz, Angel Love Alcantara Roque, and Rhia Bautista-Piamonte
provided administrative and secretarial support. The Department of
Communications, led by Vicky Tan and Karen Lane, planned and coordinated the
dissemination of Asian Development Outlook 2019 Update. Definitions
The economies discussed in Asian Development Outlook 2019
Update are classified by major analytic or geographic group.
For the purposes of this publication, the following apply:
• Association of Southeast Asian Nations comprises
Brunei Darussalam, Cambodia, Indonesia, the Lao People’s
Democratic Republic, Malaysia, Myanmar, the Philippines,
Singapore, Thailand, and Viet Nam.
• Developing Asia comprises the 45 members of the
Asian Development Bank listed below.
• Newly industrialized economies comprise Hong Kong, China;
the Republic of Korea; Singapore; and Taipei,China.
• Central Asia comprises Armenia, Azerbaijan, Georgia,
Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan,
• East Asia comprises Hong Kong, China; Mongolia; the People’s
Republic of China; the Republic of Korea; and Taipei,China.
• South Asia comprises Afghanistan, Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan, and Sri Lanka.
• Southeast Asia comprises Brunei Darussalam, Cambodia,
Indonesia, the Lao People’s Democratic Republic, Malaysia,
Myanmar, the Philippines, Singapore, Thailand, and Viet Nam.
• The Pacific comprises the Cook Islands, the Federated States
of Micronesia, Fiji, Kiribati, the Marshall Islands, Nauru,
Palau, Papua New Guinea, Samoa, Solomon Islands, TimorLeste, Tonga, Tuvalu, and Vanuatu.
Unless otherwise specified, the symbol “$” and the word “dollar”
refer to US dollars. Asian Development Outlook 2019 Update is
generally based on data available up to 2 September 2019. Abbreviations
Q Asian Development Bank
Asian Development Outlook
Association of Southeast Asian Nations
ratio proxy for stress in foreign exchange markets
Asian Development Bank developing member country
floor area ratio
foreign direct investment
Federated States of Micronesia
gross domestic product
global financial crisis of 2008–2009
Global Rural–Urban Mapping Project
goods and services tax
International Monetary Fund
Latin America and the Caribbean
Lao People’s Democratic Republic
London interbank offered rate
liquefied natural gas
loan prime rate
land value capture
money that includes cash and checking accounts
broad money that adds highly liquid accounts to M1
broad money that adds time accounts to M2
million barrels per day
medium-term lending facility
nonbank financial corporation
National Fund of the Republic of Kazakhstan
newly industrialized economy
nighttime light satellite imagery
Organisation for Economic Co-operation and Development
Organization of the Petroleum Exporting Countries
purchasing managers’ index
Papua New Guinea
People’s Republic of China
Pearl River Delta
WTO research and development
Republic of the Marshall Islands
Republic of Korea
special economic zones
small and medium-sized enterprises
United States of America
World Trade Organization ADO 2019 Update—Highlights
Growth in developing Asia is moderating but remains robust. As global trade
slows and investment weakens, regional growth forecasts are trimmed from
Asian Development Outlook 2019 by 0.3 percentage points for 2019 and by
0.1 points for 2020. Expansion in the region is projected to slow from 5.9% in
2018 to 5.4% this year, recovering somewhat to 5.5% next year. Excluding highincome newly industrialized economies, regional growth is expected to slow
from 6.4% last year to 6.0% this year and next.
Inflation remains benign in the region, but pressure is building slightly as
food prices rise. Inflation across developing Asia is forecast at 2.7% this year
and next, or 0.2 percentage points up from April forecasts.
Risks tilt to the downside. The trade conflict between the United States
and the People’s Republic of China could escalate further or even spread
beyond trade and the two economies. The risk of deeper malaise in the
global economy, and uncertainty over how policy makers around the world
will respond to weaker global growth, may stoke volatility in global financial
markets. Proliferating private debt in some regional economies could pose
another challenge to financial stability.
Developing Asia is urbanizing rapidly, promising job creation and economic
growth. However, cities must function well as labor markets if they are to enjoy
the economic benefits of agglomeration. This requires sound urban planning,
efficient public transport, and affordable housing. As cities expand over
municipal boundaries and become more connected with one another through
flows of goods, services, and people, better planning coordination is needed at
all levels of government. Yasuyuki Sawada
Asian Development Bank xAsian Development Outlook 2019 Update Asia girds for prolonged uncertainty
Regional growth remains robust but is expected to moderate. GDP
expansion in the region, though still strong, is projected to slow from 5.9%
in 2018 to 5.4% this year, then edge back up to 5.5% next year. Revisions
to April forecasts in Asian Development Outlook 2019 (ADO 2019) are 0.3
percentage points lower for this year and 0.1 points lower for next year.
The revisions reflect gloomier prospects for international trade—in part
because of re-escalation in the trade conflict between the United States and
the People’s Republic of China (PRC)—and evidence of slowing growth in the
advanced economies and the PRC, as well as in India and the larger economies
in East and Southeast Asia. Excluding newly industrialized economies, growth in
developing Asia is forecast to slow from 6.4% in 2018 to 6.0% this year and next.
» A slowing trend for growth continued in the first half of 2019. After
slowing from 6.2% in 2017 to 5.9% in 2018, growth decelerated further to
5.4% in the first half of 2019 in the economies of developing Asia that release
quarterly GDP data. Exports and investment faltered in many economies
across the region, leaving private consumption as the main support for
» Trade shrank as growth in the advanced economies moderated further.
Worsening uncertainty is driving down aggregate growth in the advanced
economies, which is forecast to moderate from 2.2% in 2018 to 1.7% in 2019
and 1.4% in 2020—in both years 0.2 percentage points lower than envisaged
in ADO 2019. The euro area and the US will grow somewhat slower than
previously projected. Japan surprised on the upside in the first half of 2019
but not enough to prop up demand for regional exports.
» Declining investment growth in developing Asia could impair future
growth prospects. Along with the weakening trend in trade, the region
suffered slower growth in domestic investment. The contribution of
investment to GDP growth fell in the first quarter of 2019 and is expected
to continue declining throughout this year. And while foreign direct
investment (FDI) inflows by non-residents continue, developing Asia
is investing more abroad, leading to net FDI outflows for the region.
Slower domestic investment, if sustained, means less new productive capacity
going forward which has implications for regional growth prospects.
The growth outlook varies across the subregions of developing Asia.
Because of the trade slowdown, compounded by a sharp downswing in the
electronics cycle, growth forecasts for the PRC and the more open economies
in East and Southeast Asia are downgraded. Growth in South Asia is now seen
moderating this year as India’s economy slows primarily for domestic reasons,
such as the pre-election decline in investment and tighter credit conditions.
In Central Asia and the Pacific, by contrast, growth prospects improve as public
spending continues to stimulate the economy in Kazakhstan and Uzbekistan and
as Papua New Guinea recovers from an earthquake in February 2018. Highlights xi Regional inflation is picking up slightly but remains benign. Headline inflation
will edge up from 2.4% in 2018 to 2.7% in 2019 and 2020—both forecasts
upward adjustments by 0.2 percentage points from ADO 2019. The revisions
come mainly from a buildup of inflationary pressure due to the rise of food prices
in the region, particularly in the PRC.
The regional current account surplus is rising. Slower imports are offsetting
weakness in exports in many developing Asian economies. The merchandise
trade surplus in the PRC rose in the first half of this year as imports fell more
substantially than exports, raising the country’s current account surplus. As a
result, developing Asia’s combined current account surplus is now forecast to
increase to 1.1% of regional GDP in 2019, or 0.7 percentage points higher than
projected in ADO 2019, before resuming its narrowing trend to 0.7% in 2020.
The escalating and broadening trade conflict may damage supply chains.
Negotiations broke down in the middle of 2019, prompting a new round of
tariff escalations, threats, and nontariff constraints on technology transfer and
investment. Bilateral trade data from the first half of 2019 show a decline in
trade between the PRC and the US, as well as evidence of trade redirection from
the PRC toward other economies in developing Asia. Foreign investment patterns
are shifting in tandem with trade...
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