World Economy

Growth in East & South Asia to Pick Up

Growth in East & South Asia to Pick UpGrowth in East & South Asia to Pick Up

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.