In Southeast Asia, the Philippines is seen leading with GDP growth at 6.6% this year and 6.7% in 2018.
In Southeast Asia, the Philippines is seen leading with GDP growth at 6.6% this year and 6.7% in 2018.

Asia Continues to Lead Global Growth Outlook

The improved outlook is based on stronger than expected GDP gains in China, Japan, South Korea, and the ASEAN nations, offsetting weaker growth in Australia and India, the previous pacesetter

Asia Continues to Lead Global Growth Outlook

The IMF’s latest “Regional Economic Outlook” report paints a picture of stronger growth across Asia, with regional gross domestic product seen expanding by 5.6% this year and 5.5% in 2018, slightly higher than its April assessment.
The Washington-based institution cited strong consumption and investment as well as better than anticipated external demand driving the pickup, despite risks including Chinese debt, rising protectionism, and geopolitical tensions including on the Korean Peninsula, The Diplomat reported.
“Capital inflows to the region continued to be sizable in the first half of 2017, and financial conditions are expected to remain supportive. Inflation has been weaker than projected, partly on account of lower commodity prices, and projections have been revised down in most countries,” the report said.
The improved outlook was based on stronger than expected GDP gains in China, Japan, South Korea, and the ASEAN nations, offsetting weaker growth in Australia and India, the previous pacesetter.
Asia continues to lead the global economy, despite geopolitical and economic risks.

Improved Outlook
China, the region’s biggest economy, is seen expanding by 6.8% this year and 6.5% in 2018, reflecting continued strong infrastructure spending and an improved real estate sector along with recovering global trade. The report said economic growth “surprised on the upside” in the first half, despite tighter financial conditions from policies aimed at addressing financial risks, while inflation remained contained.
The Chinese economy is expected to post average GDP growth of 6.3% from 2018 to 2020, based on the assumption that Beijing will keep policy “sufficiently accommodative to achieve its objective of doubling 2010 GDP by 2020.”
Japan, the region’s second-largest economy, enjoyed “above potential growth” for six straight quarters through the second quarter of 2017, “underpinned by a pickup in external demand and fiscal support.” The labor market continued to tighten, with the jobless rate falling to a 25-year low and the job-to-applicant ratio at an all-time high, although wages and inflation pressure were subdued.
The IMF sees Japan expanding by 1.5% this year, up from last year’s 1%, before an expected slowdown to just 0.7% GDP growth in 2018 as fiscal stimulus weakens along with consumption growth.
South Korea is expected to post improved GDP growth of 3% this year and next, up from the 2.8% gain of 2016, on a recovery in private consumption and investment, helped by fiscal support and a higher minimum wage.
In Southeast Asia, the ASEAN-5 economies—comprising Indonesia, Malaysia, the Philippines, Singapore, and Thailand—are also expected to accelerate, rising from 4.5% GDP growth last year to 4.9% in 2017 and 4.8% in 2018. Among the five, the Philippines is seen leading with GDP growth of 6.6% this year and 6.7% in 2018, “driven by robust domestic demand.”

India, Australia Outlook Slashed
However, the outlook was not as bright for India, which after leading in 2016 with a 7.1% GDP gain is seen dipping to 6.7% in 2017, down 0.5 percentage point from the IMF’s April projection. Demonetization and the effects of the new goods and services tax has hit growth in recent quarters, although Asia’s third-largest economy is expected to bounce back with a 7.4% GDP gain in 2018 on the back of improved private consumption and civil service pay hikes.
Australia’s outlook was also slashed by 0.9 percentage point compared to the IMF’s previous projection. While continuing its record-beating 26 straight years of economic expansion, the “Lucky Country” is expected to slow from 2.5% GDP growth in 2016 to 2.2% this year, mainly due to weather-related disruptions, rising to 2.9% in 2018.

Near-Term Risks
However, the IMF pointed to near-term risks to the outlook, including a sudden tightening in global financial conditions, a sharp adjustment in China due to mounting financial imbalances, or a worldwide shift toward protectionism, as threatened by Brexit and the Trump administration.
Escalating geopolitical risks could also hit the region’s prospects, including the threat of war on the Korean peninsula. Additionally, over the longer term, “Asia will need to tackle two key challenges: population aging and lagging productivity growth,” the IMF said.
It said aging could be addressed by policies that promote labor force participation of women and the elderly, such as in Japan, and strengthened pension systems, such as in Thailand.

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