HIGHLIGHTS „Three main headwinds continue to hamper recovery in developing Asia: recurrent lockdowns in the People’s Republic of China, the Russian invasion of Ukraine, and slowing global growth. Growth forecasts for the region are revised down from 4.3% to 4.2% in 2022 and from 4.9% to 4.6% in 2023. „East Asia’s growth forecasts are revised down to 2.9% in 2022—due to the mobility restrictions mentioned above plus deep contraction in Hong Kong, China—and down to 4.0% in 2023. „The South Asian forecast for 2022 is maintained at 6.5% but revised down marginally for 2023 from 6.5% to 6.3% following a slowdown in Bangladesh and flooding in Pakistan. „The 2022 forecast for Southeast Asia is upgraded from 5.1% to 5.5% on robust consumption and tourism recovery in Malaysia, the Philippines, Thailand, and Viet Nam. The 2023 forecast is revised down to 4.7% as global demand weakens. „Growth prospects in the Caucasus and Central Asia are adjusted up from 3.9% to 4.8% in 2022 as spillover from the Russian invasion of Ukraine has been more benign than expected. The growth forecast for the Pacific in 2022 is also revised up, from 4.7% to 5.3% on a strong tourism rebound in Fiji. „Regional inflation forecasts are revised down slightly for 2022 from 4.5% to 4.4% but upgraded for 2023 from 4.0% to 4.2%. Even with outlook deterioration, developing Asia will grow more than other regions and suffer less inflation than most. „Multiple risks abound as the three main headwinds could worsen, along with geopolitical risks and climate change. Recent developmentsGlobal and regional developments since September have been roughly in line with pessimistic expectations laid out that month in the Asian Development Outlook 2022 Update. The world economy chugged along in the third quarter (Q3) of this year but is now set to slow markedly, weighed down by weakening in the United States, euro area, and People’s Republic of China (PRC). Persistently elevated inflation in the US led the Federal Reserve to raise its policy rate in November by 75 basis points, the fourth consecutive hike of that magnitude. Despite a resilient labor market, investment prospects and consumer confidence worsened, suggesting that the Q3 rebound to seasonally adjusted annualized growth of 2.6% will be short-lived. Similarly in the euro area, GDP growth outperformed expectations in Q3, but annual inflation spiked further to 10.6% in October. Leading indicators are consistent with continued deceleration deepened by an energy crisis and aggressive policy rate hikes by the European Central Bank. Economic activity in the PRC remains hampered by GLOBAL GLOOM DIMS ASIAN PROSPECTSThe Asian Development Bank Regional Economic Outlook Task Force led the preparation of a revised outlook for this Asian Development Outlook Supplement. The task force is chaired by the Economic Research and Regional Cooperation Department and includes representatives of the Central and West Asia Department, East Asia Department, Pacific Department, South Asia Department, and Southeast Asia Department. The data and analysis in this Supplement are generally based on information available to 30 November 2022.SUPPLEMENTDECEMBER 2022ASIAN DEVELOPMENT OUTLOOK 2 ASIAN DEVELOPMENT OUTLOOK SUPPLEMENTsporadic coronavirus disease (COVID-19) outbreaks, zero-COVID restrictions, and continued weakness in the property market. Growth picked up to 3.9% year on year in Q3, as the Omicron wave faded, but is now losing steam. The official PRC purchasing managers’ index (PMI) fell to 49.4 in November, below the threshold of 50 separating expected improvement from deterioration, as conditions worsened across all sectors except construction. Adding to a consumption shift post pandemic from goods to services, slowdowns in the world’s largest economies are further depressing demand for manufactured goods from developing Asia. Exports of goods from the PRC declined by 10.4% between July to October. In the rest of the region, exports dropped in July by more than 7% from their peak in June and stabilized around that level in August. Lower export orders point to continued weakness going forward. Among the 11 economies for which data on new export orders are available, 10 recorded readings below 50 in November, indicating declines from the previous month (Figure 1). India was the only exception. Readings of 48.3 for the Republic of Korea (ROK) and 35.1 for Taipei,China are particularly indicative of the worsening external environment, as these economies are typically bellwethers for international trade conditions. PMI readings are also consistent with softening economic activity in most economies.Figure 1 Leading indicators: New export orders and manufacturing PMIsLeading indicators show signs of weakening.TaipeiChinaIndonesiaViet NamMalaysiaHong Kong ChinaPhilippinesRepublic of KoreaThailandPeople’s Republic of ChinaSingaporeIndiaExport ordersImprovingWorseningIndexPurchasing managers’ indexImprovingWorse