Asian Development Outlook Supplement December 2021

This publication provides updated economic growth forecasts for developing Asia. It downgrades forecasts by 0.1% to 7.0% for 2021 and 5.3% for 2022.The main risk to the outlook remains a resurgence in cases of coronavirus disease (COVID-19), especially given the emergence of a fast-spreading variant. Other risks include a protracted correction in the housing market that could induce an unexpectedly sharp slowdown in the PRC, rising inflation, and persistent global supply disruption.

Australian central bank holds rate as growth slips

Significance The RBA has cut its growth forecasts amid rising job losses, weakening demand and increasing signs that the latest COVID-19 lockdowns will continue to slow the economy until the pace of the vaccine roll-out programme can be increased. Impacts Although the RBA is independent, the government will hope it keeps rates low ahead of the elections due next year. Commercial lenders could raise interest rates independently of the RBA if inflation remains high. Wage pressures will re-emerge as labour markets tighten but may be mitigated by the extent of underemployment. Economic growth will be uneven across the country in coming months as pandemic-related restrictions vary by location.

EU growth forecasts could influence fiscal policy

Headline EU: Growth forecasts could influence fiscal agenda