ADB Economist Discusses Impact of Trade Tensions on Asia-Pacific Economies

CGTN Europe

CGTN Europe spoke to the Asian Development Bank's Principal Economist Matteo Lanzafame.

Transcript

00:00U.S. tariffs will have a significant impact on Asia-Pacific economies,

00:04so say the Asian Development Bank in its latest outlook.

00:08The first half of 2025 saw a surge in trade before most of the tariffs came into effect,

00:14but regional growth expectations are now being revised down from earlier predictions,

00:204.8% for this year, down from 4.9%,

00:24and 4.5% for 2026, that's down from 4.7%, so down just 0.2%.

00:32India's 2026 growth forecast has been cut by 0.3%,

00:38as it contends with steep U.S. tariffs of 50%.

00:41But the bank's forecast for China remains steady, remains the same,

00:45with policy support and export diversification expected to cushion tariff challenges.

00:51The report concludes that the unresolved U.S.-China trade talks

00:56and potential duties on semiconductor and pharmaceuticals

01:00could have a negative, rippling impact across the region.

01:05Matteo Lanzafame is a principal economist at the Asian Development Bank.

01:09So this year, the outlook has really been shaped mostly by external factors.

01:15This includes the increase in tariffs,

01:18but also the increase in trade policy uncertainty.

01:22And both of these factors,

01:24we see them as denting growth and economic activity in the region.

01:28On the other hand, we have some positive news coming from the policy sites.

01:33So both fiscal support is helping the economies in the region to continue to grow.

01:41And at the same time, because inflation is coming down,

01:44there is more policy space for central banks to reduce interest rates

01:48and, again, support activity, in particular investment and consumption.

01:53So overall, even if the external environment has worsened significantly,

01:57growth in the region continues to remain resilient.

02:00And we expect it to be the case next year as well.

02:03The tourist numbers are interesting, aren't they?

02:06How much of a growth driver is that in the region?

02:10It is very important for several economies,

02:12in particular for the island economies in the Pacific,

02:15but also for some economies in Southeast Asia, like Thailand.

02:19If we look at the trends,

02:20we see that the recovery from the pandemic

02:24is, on average, nearly completed throughout the region.

02:30So arrivals are more or less back at the same level

02:33as they were on average in 2018, 2019.

02:36However, there is a certain heterogeneity across the different economies.

02:42And so in some cases, in particular in Thailand,

02:44that I was mentioning before,

02:45in other economies, which are more dependent on the arrival of Chinese tourists,

02:50tourists have not yet recovered completely.

02:54A number of assumptions were made in this report, weren't they?

02:58Such as the price of oil, interest rates,

03:00and currency exchange rates remaining pretty much constant.

03:04What would really change your short- to medium-term outlook?

03:08Well, there are a number of risks.

03:11And obviously, our projections are subject to, you know,

03:15potentially deviations, depending on what happens going forward

03:19and the new data that come in.

03:22In general, what we think are the main risks to the outlook

03:25are still related to trade.

03:27It's both uncertainty and the probability or the, you know,

03:33likelihood that a new escalation of tariffs could come in.

03:37For example, related to new sectoral tariffs,

03:41we just seen a few days ago that new U.S. tariffs

03:44are going to be implemented on imports of pharmaceuticals.

03:47But there is also a risk that semiconductors, for example,

03:51which are very important for some of the economies in the region,

03:54could be subject to tariffs as well.

03:57And there are obviously other risks related to geopolitical conflicts,

04:03the possibility of, you know, financial market corrections,

04:07and also the property market adjustment that we have seen in the PRC,

04:12which is still ongoing.

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