41145
Asia Facing Turbulent Times
World Economy

Asia Facing Turbulent Times

Asian economies are sailing in choppy waters, facing severe headwinds from an uncertain and challenging global environment.
First, the global recovery has been uneven and weaker than expected. On top of that, global trade has been sluggish and financial conditions have been volatile, EJInsight reported.
The rise of China as a global economic superpower has also created challenges of its own, as China’s necessary rebalancing from manufacturing towards services and investment to a consumption-driven economy—critical for both China’s and global growth over the medium term—remains bumpy.
As elsewhere, many Asian economies face risks associated with natural disasters and geopolitical and domestic political uncertainty. But all is not doom and gloom, as Asia also remains the major engine of the global economy: it continues to provide nearly two-thirds of global growth.
In addition, the region has policy buffers such as current account surpluses and high reserve levels and is likely to benefit from further economic integration and regional and multilateral trade agreements such as the Trans-Pacific Partnership.
Asia’s growth is moderating slightly, in line with the rest of the global economy. According to the most recent IMF World Economic Outlook, activity in the region moderated in the second half of 2015, and is expected to continue decelerating in the near term.
GDP growth for the region is forecast at 5.3% in both 2016 and 2017, a meager 0.1 percentage point lower than in 2015.
But while external demand is relatively weak, domestic demand, particularly consumption, is expected to remain resilient across most of the region.

Important Differences
The moderation in Asia’s growth masks important differences within the region. In China, GDP growth is expected to continue to moderate to 6.5% this year and 6.2% in 2017. This reflects ongoing rebalancing and other structural reforms, which are expected to continue to boost consumption and the services sector, while investment and manufacturing remains relatively weak until excess capacity is resolved.
India, on the other hand, is expected to remain the fastest-growing large economy in the world, with GDP expanding by 7.5% in 2016-17, underpinned by strong private consumption and helped by lower oil prices.
In Japan, GDP growth is projected to remain at 0.5% in 2016, slowing to -0.1% in 2017 as the widely anticipated consumption tax rate hike (from 8 to 10%) kicks in, though this forecast does not incorporate likely offsetting measures to support activity.
Growth in Hong Kong is expected to remain below potential and to slow to 2.2% in 2016, from 2.4% in 2015, with private consumption growth expected to moderate due to lower tourism inflows and receipts from mainland China, and negative wealth effects from stock market and property market adjustment.

Downside Risks
Despite a robust outlook for the region, downside risks continue to dominate the economic landscape. Global growth could slow by more than expected or financial conditions could tighten suddenly. As many economies in the region have seen debt levels rise rapidly over the last decade, a combination of slower growth and higher borrowing costs could tip some corporates and households over the edge and further constrain growth.
In addition, regional growth is more dependent on China than ever before. While rebalancing in China is a price worth paying for in terms of durable and resilient growth over the longer term, the short-term transition is likely to be bumpy and the impact on countries and markets is likely to vary.
Countries that export goods that support China’s investment and construction (producers of metals, for example) would be adversely affected, while others that export consumer goods to China or are destinations for rapidly-growing Chinese tourism could benefit.
Financial linkages are also growing with regional markets becoming more sensitive to shocks from China after the global financial crisis.
A wide range of policies can be used to harness the region’s potential. In addition to building buffers, policymakers should deploy macroeconomic policies to boost demand if needed.

 

Short URL : http://goo.gl/kHaBFK
  1. http://goo.gl/QKbRVE
  • http://goo.gl/a4hScL
  • http://goo.gl/xK0GyJ
  • http://goo.gl/hKwi2L
  • http://goo.gl/BPi4x8

You can also read ...

Malaysia Economy Set to Grow
Malaysia’s economy is set to grow this year with gross...
The high resolution MRI, CT, and sonogram images underpin advances in medical diagnosis.
The growth in labor productivity – real output per hour worked...
Growth is forecast at 2.2% in 2017, down from  a previous projection of 2.8%.
UAE’s real GDP growth will slow in 2017, owing to oil...
EU heavyweights France, Germany and Italy argue that there is growing evidence of discrimination, especially by state owned companies and a determined Chinese strategy to secure the most modern European technologies in key industrial sectors.
Both Brussels and Washington are taking steps to force China...
Based on the index  gas, fuels, water and housing, especially  sub-indexes, declined by 2.4% year on year in July.
Subdued demand due to cash shortages in Zimbabwe has resulted...
German Investor Morale Slumps
German investor confidence fell sharply in August, amid...
Pak Current A/C Deficit Widens
Pakistan posted a glaringly high current account deficit of $2...
The surge in European stocks pushed up the MSCI world equity index.
European stocks broke a three-day losing streak on Tuesday,...

Trending

Googleplus