Global trade rebound boosts growth in Asia, Pacific

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ISLAMABAD, Sep 26 (APP): Growth remains strong across most of
developing Asia as a result of the broad-based recovery in global
trade, robust expansion in major industrial economies, and improved
prospects for the People’s Republic of China (PRC).
This will combine to push growth in developing Asia for 2017
and 2018 above previous projections, says a new Asian Development
Bank (ADB) report.
In an update of its flagship annual economic publication,
Asian Development Outlook (ADO) 2017, ADB forecasts gross domestic
product (GDP) growth of 5.9% in 2017 and 5.8% in 2018 for developing
Asia.
“Growth prospects for developing Asia are looking up,
bolstered by a revival in world trade and strong momentum in the
PRC,” said ADB Chief Economist Yasuyuki Sawada. “Countries in
developing Asia should take advantage of favorable short-term
economic prospects to implement productivity-enhancing reforms,
invest in badly needed infrastructure, and maintain sound
macroeconomic management to help increase their long-term growth
potential.”
Growth across developing Asia is buoyed by a revival in trade.
The dollar value of the region’s exports surged by 11% in the first
5 months of 2017 over the same period in the previous year, and the
value of its imports rose by 17%.
The pickup follows two consecutive years of contracting export
values caused by falling commodity prices and subdued external
demand for manufactures. Excluding the PRC, the eight largest
regional developing economies saw real manufacturing exports
rebound.
Industrial economies’ growth will reach 2% in 2017 and 2018,
up by 0.1 percentage points from the April 2017 forecast. Consumers
are keeping the world’s largest economy on track, as the United
States’ expansion enters its ninth year.
Growth in Japan surprised on the upside, spurred by a
combination of improving consumer confidence and business sentiment.
Expansive fiscal and monetary policies, easing political
uncertainty, and robust market confidence are driving the recovery
in the euro area, the report said.
Expansionary fiscal policy and unanticipated external demand
helped the PRC exceed expectations in the first half of 2017. Output
will increase 6.7% in 2017, an increase of 0.2 percentage points
over the previous forecast.
In 2018, growth will slow to 6.4% as anticipated reforms to
trim industrial overcapacity and reduce financial risks kick in.
India continues its strong showing, although demonetization
and implementation of the new goods and services tax regime have
dented consumer spending and business investment.
These short-term disruptions are expected to dissipate,
allowing these initiatives to generate growth dividends over the
medium term. India’s GDP growth is downgraded to 7% in FY2017, a 0.4
percentage point drop from the April forecast. In FY2018, the
forecast is adjusted down to 7.4% from 7.6%.
Southeast Asia, meanwhile, is set for stronger growth as
output accelerates steadily from 5% in 2017 to 5.1% in 2018, an
upgrade from 4.8% and 5% in the previous forecast.
Regional growth will be led by rising exports from Singapore
and Malaysia, while the forecasts for regional leaders Indonesia and
Thailand are maintained.
Growth forecasts for Central Asia are revised up this year and
next amid stable oil prices, improving prospects for the Russian
Federation, and rising remittances. The Pacific outlook, on the
other hand, is retained for 2017 but adjusted slightly downward for
2018 as prospects for the largest Pacific economies-Papua New Guinea
and Timor-Leste-are unchanged.
Risks to the region have become more balanced. Loose fiscal
policy in the US and lower oil prices are potential upside risks to
the region, while downside risks include tighter global liquidity,
economic disruption from a geopolitical event, or a weather-related
disaster.
While the region remains better prepared for potential risks
from the US unwinding its quantitative easing, high debt levels in
Asia and the Pacific now pose a risk to financial stability.
Because long-term interest rates in many Asian economies are
closely linked to those in the US, policy makers need to strengthen
their financial positions further and monitor debt levels and asset
prices.