Bangkok--14 Dec--UN
Developed world economic woes to dent Asia-Pacific growth which needs immediate stimulus and rebalancing over the coming years, says ESCAP
Asia-Pacific growth will slow down significantly in 2012 due to continuinguncertainty in the advanced economies, but the region has the means tooffset the adverse impact, according to latest United Nations macroeconomicprojections and policy advice released here today.
Growth in Asia-Pacific developing economies is forecast to slip from anestimated 7.2 per cent this year to 6.6 per cent in 2012, with majorAsia-Pacific exporting economies being most affected, says the Economic andSocial Survey of Asia and the Pacific 2011: Year-end Update, published bythe United Nations Economic and Social Commission for Asia and the Pacific(ESCAP).
However, Asia and the Pacific will continue driving the global economy in2012 and remains the world’s fastest growing region as it is in a positionto sustain its economic dynamism due to strong macroeconomic fundamentals,according to ESCAP.
“If serious pressures on growth performance were to materialize, the strongbudgetary positions of many countries would allow the enactment ofshort-term fiscal stimulus measures, as some countries have already begundoing,” said Nagesh Kumar, Chief Economist of ESCAP who launched theYear-end Update in Bangkok.
The other positive news for the region, coping with historically high andvolatile prices, is a moderation in inflation levels in 2012 in theexport-led economies, though this is partly due to “a reduction in demandemanating from the sluggish global environment,” according to the Update.
“However, some countries with relatively high inflation levels confront thedilemma of maintaining price stability in the face of slackening growthresulting from a deteriorating global environment,” Mr. Kumar said.
Divergent impact across regionThe impact of the financial and economic crisis in the European Union andthe United States will vary across the region with domestic demand-ledeconomies relatively unaffected.
Among the major emerging economies, while global export powerhouse China isforecast to see growth decline from 9.3 per cent this year to 8.5 per centin 2012, India is also forecast to see relatively constrained growth of 7.8per cent in 2012. Indonesia is forecast to maintain robust growthperformance of 6.5 per cent next year.
The Republic of Korea and Hong Kong, China, are forecast to see their 2012growth decline to 3.5 per cent and 4.3 per cent, respectively, from thisyear’s 3.9 per cent and 5.0 per cent, respectively.
Singapore’s 2011 projected growth of 5.2 per cent will slip to 3.0 per centnext year, while Thailand’s 2011 flood crisis-reduced growth of 2.0 percent is projected to more than double to 4.5 per cent next year on the backof a resumption of production and large-scale reconstruction projects.
There is considerable scope for supporting growth through governmentpolicy, says ESCAP. “Most countries in the region retain substantial fiscalspace to be able to increase government spending. Interest rates, which arecurrently at relatively high levels across the region, can also be kept onhold or even decreased if necessary, which could greatly stimulate lendingacross the region.”
Risks from Euro zone debt crisis and US slowdownThe Year-end Update advises emerging Asia-Pacific economies to be on alertfor financial turbulence, particularly caused by capital outflows due torisk aversion triggered by the crisis in the euro zone and suggests theneed for stronger capital controls to deal with such risks.
A more fundamental challenge is shrinking demand for Asia-Pacific exportsin traditional rich world markets. Although Asia-Pacific intraregionaltrade has been growing faster than its trade with the rest of the world,ESCAP sees limited scope of this in helping counteract the loss ofdeveloped world markets over the short term. “The shift from extraregionalto intraregional trade and demand, although offering significant potentialin the medium-term, will not be sufficient to make up for the slowdown inthe markets of the developed economies in the short term,” the ESCAP ChiefEconomist pointed out.
ESCAP medium-term policy advice for the region is to reduce exportdependence on developed economies, which are expected to remain sluggishfor an extended period, by continuing to rebalance growth through inclusivepolicies to boost demand within Asia and the Pacific.
Natural disasters to slash growth prospects in South-East AsiaThe unprecedented flooding in South-East Asian countries this year isestimated to have caused a cumulative production loss of about $6.3 billionor 0.9 per cent of the combined gross domestic product (GDP) of Cambodia,Lao People’s Democratic Republic, the Philippines, Thailand and Viet Nam,says the Year-end Update.
Thailand was the worst hit, with flooding projected to lower the country’s2011 GDP by 1.3 per cent, compared to flood-caused GDP reductions of 0.3per cent each in Lao PDR, Myanmar and the Philippines. However,post-disaster economic recovery investments are projected to restoreeconomic growth in these countries over 2012.
ESCAP recommends investment in social sectors in the disaster-hit countriesas part of recovery and reconstruction efforts, new and strategicinvestments in the agriculture sector, as well as improvement in urbanplanning and land use to reduce disaster risks.
For more information, please contact:
Ms. Francyne Harrigan
Chief, Strategic Communications and Advocacy Section, ESCAP
T: +66-2 288 1864
E:
[email protected]