East and South Asia are projected to remain the world’s most dynamic and fastest-growing region in 2016/17, despite the recent economic slowdown, according to the United Nations World Economic Situation and Prospects 2016 report released Wednesday.
Aggregate growth in East and South Asia is forecast to pick up slightly from 5.7% in 2015 to 5.8% in both 2016 and 2017 amid a modest improvement in global growth. As the world economy continues to face considerable headwinds, the external environment for most economies in the region will remain challenging, IIFL reported.
In 2015, sharply lower commodity prices, weak trade activity, large capital outflows and increased financial market volatility weighed on aggregate growth, which fell to the lowest level since 2001.
Risks to outlook could negatively impact trade and investment. A key risk to the regional outlook is a sharper-than-expected slowdown of the Chinese economy, which would negatively impact trade and investment flows in East Asia.
Another risk factor is related to the monetary policy normalization in the United States, which could lead to renewed financial turmoil or a tightening of liquidity conditions across the region.
East Asia is projected to see steady growth. According to the report, East Asia is forecast to see solid gross domestic product growth of 5.6% in both 2016 and 2017–about the same rate as in 2015, but significantly below the average of 6.3% recorded in 2012-14.
Further moderation in China’s growth is expected to be offset by a pickup in activity in some other large economies such as Hong Kong Special Administrative Region of China, Indonesia, Taiwan Province of China and Thailand.
Given protracted weak demand in most developed countries and global financial market uncertainty, East Asia’s economies will continue to rely on domestic and regional sources of growth, including more expansionary fiscal policies.
The economies of Taiwan and Hong Kong have posted weak export performances over the past year. For both economies, a pick-up in exports and steady private consumption growth are expected to drive moderate growth recoveries in 2016/17.
Among the bright spots in the region have been the economies of Myanmar and Vietnam, where growth-supporting factors, such as new investment and strong consumer spending, are projected to remain in place.
The report notes that in most East Asian economies, the official unemployment rate is low, ranging from 1 to 4%. Major exceptions are Indonesia and the Philippines, where unemployment stands near or above 6%.
Average consumer price inflation in East Asia is expected to pick up from an estimated multi-year low of 1.6% in 2015 to 2.2% in 2016, in line with stronger activity in the majority of the sub-region’s economies.
