Pedestrians walk past a logo of the Asian Development Bank (ADB) displayed outside its headquarters in Manila, Philippines, on Sept 2, 2010. (TED ALJIBE / AFP)

MANILA - The Asian Development Bank (ADB) lowered its forecasts for economic growth in developing Asia and the Pacific to 4.3 percent this year amid mounting challenges buffeting the region, according to an outlook report released on Wednesday.

The updated Asian Development Outlook 2022 projects the region's economy to grow by 4.9 percent in 2023, compared with the bank's projection in April of a 5.3 percent expansion.

The ADB also raised its forecast for inflation in developing Asia this year to 4.5 percent from a previous projection of 3.7 percent. The forecast for next year is 4.0 percent, up from 3.1 percent

"Developing Asia continues to recover, but risks loom large," ADB Chief Economist Albert Park said, urging governments in developing Asia to remain vigilant against these risks and take the necessary steps to contain inflation without derailing growth.

According to the report, domestic consumer spending and investment are driving growth as economies in the region continue to recover from the pandemic, thanks in part to vaccination drives and declining COVID-19 deaths.

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However, it added the continuing Russia-Ukraine conflict has heightened global uncertainty, worsened supply disruptions, and unsettled energy and food markets. More aggressive monetary tightening by the US Federal Reserve and the European Central Bank is denting global demand and rattling financial markets.

"Since the April Asian Development Outlook, various headwinds have strengthened," Park said.

"More aggressive tightening by the US Federal Reserve and other central banks is denting global demand and rattling financial markets."

The outlook for the sub-regions this year remained mixed, with Southeast Asia and Central Asia expected to grow faster than previously projected at 5.1 percent and 3.9 percent, respectively.

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The ADB, however, kept its growth forecast for South Asia at 6.5 percent, despite a lower growth estimate for India and an economic crisis in Sri Lanka.

The ADB also raised its forecast for inflation in developing Asia this year to 4.5 percent from a previous projection of 3.7 percent. The forecast for next year is 4.0 percent, up from 3.1 percent. 

With Reuters inputs