Emerging Asia Growth to Slow to 6.3% in 2018-2022

Economic growth in emerging Asia will remain steady this year before slowing over the medium term as China's expansion decelerates in the next five years, the Organization for Economic Cooperation and Development said in a report released Tuesday.

Gross domestic product in emerging Asia, which includes Southeast Asia, China and India, is forecast to grow by 6.4% in 2017 in real terms, unchanged from last year, and by 6.3% on average from 2018 to 2022. From 2011 to 2015, emerging Asia grew by 7.1%, Nikkei reported.

"The region's growth is also projected to remain solid in the medium term. While growth will slow in China, it is expected to stay brisk in India," the OECD's Development Center report said. "Structural reform challenges in China indicate that the pace of growth will slow from its 2011-15 rate."

Curbing excess capacity and maintaining financial market stability are China's key constraints to growth. The OECD said it foresees China growing at 6.2% from 2018 to 2022, down from a 7.9% average expansion from 2011 to 2015.

"A prominent domestic challenge for China is to pursue reforms centered on financial markets and industrial capacity while ensuring that the economy does not lose significant steam," the OECD said.

India, on the other hand, will grow at an average pace of 7.3% over the medium term, up from 6.8% in 2011 to 2015, despite strains from economic reforms. Consumer spending and investment will drive growth from 2018 to 2022 following the easing of foreign ownership restrictions in some industries. Increased government spending should likewise boost growth, the OECD said.

Growth in the Association of Southeast Asian Nations will also pick up over the medium term. The regional grouping is expected to grow by 5.2%, compared with 5.1% from 2011 to 2015. Robust consumer spending and ambitious infrastructure projects will drive growth in the region from 2018 to 2022, the OECD said.

Cambodia, Laos and Myanmar are projected to grow the fastest, while the Philippines will lead the expansion among the region's five largest developing economies.

Despite emerging Asia's favorable growth prospects, the region must be watchful of key risks, the OECD said. These include faster-than-expected monetary policy normalization in advanced economies, a rapid rise in private debt and protectionism.

Global GDP Forecast at 3%

After exceeding expectations in 2017, the global economy is projected to carry forward its current momentum to generate a 3% growth rate through 2018, the Conference Board in US  said in its latest Global Economic Outlook 2018 on Monday, Xinhua reported.

"Global growth has finally left the starting gate since the global economic and financial crisis," said Bart van Ark, chief economist of the Conference Board. "GDP growth, which we predicted to grow at 2.8% a year ago, is likely to end at about 3% for 2017, and through 2018."

The growth uptick in 2017 reflected a combination of unique events, including the stabilization of energy and commodities prices, improved business confidence based on hopes for fiscal stimulus and tax reforms by the (US President Donald) Trump administration and a cyclical recovery in Europe.

The report also identified several forces that could help strengthen the quality of growth and make it more sustainable over the next decade. "The good news is that a larger role for qualitative growth factors—an improvement in labor force skills, digitization and especially stronger productivity growth—may help sustain growth and provide better conditions for businesses to thrive over the next decade," added van Ark.

Labor shortages may help induce faster investment growth especially in sectors with high demand for scarce talent. This increased capital intensity is a source of labor productivity growth, particularly for Europe, the United States, and other mature economies.

Investment growth can also be sustained by improvements in the "quality" of capital, caused by a shift toward more investment in machinery and equipment and a greater concentration in digital assets and services.

Momentum in mature economies increased during 2017, which sets them up to continue growing at a decent pace in 2018 compared to the previous five-year average of 1.8%, according to the report.

Mature economies are projected to grow by 2.1% in 2018 compared to 2.2% in 2017. The US economy will especially benefit from carrying stronger investment growth into next year.