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Asian economies deliver 60pc of global growth

Asian economies deliver 60pc of global growth

author avatar
24 Apr 2017 - 12:01
Asian economies deliver 60pc of global growth
author avatar
24 Apr 2017 - 12:01

Kabul demand, rebounding global commodity prices and domestic reforms, making the region the largest single contributor to global growth at 60 percent.

A new Asian Development Bank (ADB) report forecast on Monday gross domestic product (GDP) growth in Asia and the Pacific to reach 5.7% in 2017 and 2018, a slight deceleration from the 5.8% registered in 2016.

Asian Development Outlook (ADO) says: “Developing Asia continues to drive the global economy even as the region adjusts to a more consumption-driven economy in the People’s Republic of China (PRC) and looming global risks.”

Yasuyuki Sawada, ADB’s chief economist, said: “While uncertain policy changes in advanced economies do pose a risk to the outlook, we feel that most economies are well positioned to weather potential short-term shocks.”

The US, euro area and Japan are expected to collectively grow by 1.9% in 2017 and 2018. Rising consumer and business confidence and a declining unemployment rate have fueled US growth, but uncertainty over future economic policies may test confidence.

The euro area continues to strengthen, but its outlook is somewhat clouded by uncertainties such as Brexit. Meanwhile, Japan remains dependent on its ability to maintain export growth to continue its expansion, according to the report.

It added the PRC’s growth continues to moderate as the government implements measures to transition the economy to a more consumption-driven model. Overall output is expected to slow to 6.5% in 2017 and 6.2% in 2018, down from 2016’s 6.7%.

“South Asia remains the fastest growing of all sub-regions, with growth reaching 7% in 2017 and 7.2% in 2018. In India, the sub-region’s largest economy, growth is expected to pick up to 7.4% in fiscal year (FY) 2017 and 7.6% in FY2018, following the 7.1% registered last FY.

“The impact of the demonetization of high-value banknotes is dissipating as the replacement banknotes enter circulation. Stronger consumption and fiscal reforms are also expected to improve business confidence and investment prospects in the country.”

The Southeast Asia region will grow 4.8% in 2017 and 5% in 2018, from the 4.7% recorded last year. Commodity producers such as Malaysia, Viet Nam and Indonesia will be boosted by the recovery of global food and fuel prices.

Growth in Central Asia is expected to reach 3.1% in 2017 and 3.5% in 2018, on the back of rising commodity prices and increased exports, albeit with large heterogeneity among countries in the region.

Countries in the Pacific will reach 2.9% and 3.3% growth over the next 2 years as the region’s largest economy, Papua New Guinea, stabilises following a fiscal crunch and Fiji and Vanuatu recover from natural disasters.

Regional consumer price inflation is projected to accelerate to 3% in 2017 and 3.2% in 2018 from the 2.5% in 2016 on the back of stronger consumer demand and increasingly rising global commodity prices. Inflation projections for the next two years, however, are well below the 10-year regional average of 3.9%.

Risks to the outlook include higher US interest rates, which will accelerate capital outflows, although this risk is mitigated to some degree by abundant liquidity throughout the region.

On the domestic front, increasing household debt in some Asian economies is a rising risk. The risk can be countered through prudent macro prudential policies, such as requiring tighter debt-to-income ratios for loans.

The Manila-based ADB is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration.

pr/mud

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