The Asian Development Bank lowered its 2016 growth forecast for developing Asia on Monday, citing the slowing U.S. economy and near-term shocks from Britain's decision to leave the European Union.
Developing Asia, which groups 45 countries in the Asia Pacific region, is now expected to expand 5.6 percent this year, slightly weaker than a March forecast of 5.7 per cent, the ADB said in a supplement to its Asian Development Outlook 2016, reports Reuters.
The shock British vote in June to secede from the EU has chilled already tepid growth in the euro area and has shaken global financial markets. The Manila-based multi-lateral lending agency kept its 2017 growth estimate for the region at 5.7 per cent, however.
"Although the Brexit vote has affected developing Asia's currency and stock markets, its impact on the real economy in the short term is expected to be small," said ADB chief economist Shang-Jin Wei.
"However, in light of the tepid growth prospects in the major industrial economies, policy makers should remain vigilant and be prepared to respond to external shocks to ensure growth in the region remains robust."
The ADB believes China is still on track to grow 6.5 per cent this year and 6.3 per cent in 2017, with government plans to cut excess industrial capacity in the world's second-largest economy expected to weigh on growth next year.
China's economy expanded slightly faster than expected in the second quarter but private investment growth shrank to a record low, suggesting future weakness which could pressure the government to roll out more support measures.
Growth forecasts for Southeast Asia were also left unchanged at 4.5 per cent this year and 4.8 per cent next year.