Asian Economies Set to Grow 5% Amid US Economy Boost and AI Surge: ADB Report

Developing Asian economies are forecasted to grow at a 5% annual rate, driven by a strong US economy and rising demand for AI-related computer chips, according to an Asian Development Bank report. The report highlights potential threats from protectionist measures and praises efforts to control energy and food prices.

Developing Asian economies are projected to grow at an annual pace of 5% this year, buoyed by a robust US economy and surging demand for computer chips that power artificial intelligence, the Asian Development Bank (ADB) revealed in a report on Wednesday.

The forecast marks a slight upward revision from the ADB's April estimate of 4.9% growth. However, the regional lender expressed concerns over potential protectionist policies, including increased tariffs on Chinese exports, contingent on the US presidential election's outcome. Among the positive trends identified was a significant rebound in exports of computer chips and other advanced electronics from Asia, spurred by the rapid adoption of artificial intelligence technologies.

The ADB highlighted that energy and food prices are moderating, although inflation remains high in Pakistan, Laos, and Myanmar. The increase in global demand for semiconductors and related electronics has driven stronger growth in Taiwan, Hong Kong, Singapore, and South Korea, with continued momentum expected. Spending on memory chips crucial for AI is projected to grow by 77% this year, according to data from World Semiconductor Trade Statistics.

The upcoming US presidential election poses a significant source of uncertainty, potentially leading to higher tariffs on global imports and exacerbating US-China trade tensions. The ADB report also noted the volatility in China's property market and potential impacts on Asia's developing economies.

Other key takeaways included the moderation of energy inflation to pre-pandemic levels and a decline in food inflation, although elevated. Rice prices, which hit a 16-year peak in January, have dropped by 12% and are expected to fall further due to record harvest projections for 2024-2025. The La Nina climate phenomenon's impact on rainfall could also influence crop yields, with varying regional effects.

(With inputs from agencies.)