THE UN World Economic Situation and Prospects report released Wednesday places South and East Asia as the world’s most dynamic regions with a strong economic outlook for 2017.
In light of disappointing global growth, Lenni Montiel, Assistant Secretary-General for Economic Development at the United Nations Department of Economic and Social Affairs, stressed the “need to redouble the efforts to bring the global economy back on a stronger and more inclusive growth path and create an international economic environment that is conducive to sustainable development.”
The report states that the world economy expanded by just 2.2 percent in 2016, the slowest rate of growth since the Great Recession of 2009. But while the global growth forecast has been revised downward from previous projections, the projections for Asia remain very optimistic.
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Domestic demand, in particular private consumption and public investment, and supportive macroeconomic policies remained the key drivers of regional growth. However, exceptionally weak export growth continued in 2016, contributing to the underperformance of several larger economies.
Many of the larger Association of Southeast Asian Nations (ASEAN) nations, namely Indonesia, Philippines and Thailand, saw an acceleration of output growth in 2016, driven by stronger domestic demand.
Indonesia is expected to experience more growth, from 4.8 percent in 2015 to between 5.1 and 5.3 percent annually during the 2016-2018 period.
Philippines, on the other hand, is estimated to have grown by 6.3 per cent in 2016, up from 5.9 per cent in 2015, and is expected to expand by 6.0 per cent to 6.1 per cent annually during 2017-2018.
The report said this due to an increase in household spending, thanks to favourable employment conditions, larger remittance inflows, higher public sector salaries and an increase in government spending, particularly preceding the general election in May 2016.
It said Thailand’s economy is estimated to grow at an annual pace of 3.1 percent to 3.4 percent between 2016 and 2018, an increase from 2015’s 2.8 percent.
The report said some slowdown in economic activities can be expected in the transition period following King Maha Vajiralongkorn’s ascension to the throne, but this will only be temporary and is not likely to be significant.
Meanwhile, ASEAN neighbours Singapore and Malaysia saw a deceleration of growth from 2 and 5 percent in 2015 to 1.7 and 4.4 percent in 2016 respectively. The slowing in Singapore is, however, expected to be temporary with projections in 2017 and 2018 seeing a return to form due to a modest recovery in global and regional trade.
The report attributes the underwhelming growth in Malaysia to decreased consumer spending – the main growth driver in recent years – due to less robust job markets and households’ adjustment to the higher cost of living, especially since the introduction of the goods and services tax in 2015.
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Among the largest countries, India has positioned itself as the most dynamic emerging economy. India’s economy is projected to expand by 7.7 percent and 7.6 percent in 2017 and 2018 respectively, benefiting from strong private consumption.
Despite the optimistic outlook for Asia, it is based on factors that are subject to considerable uncertainty – stronger demand in developed economies, higher global commodity prices and rising infrastructure investment are all considered to be key drivers in economic growth.
Political instabilities in some areas could also pose a risk to investment prospects.
