Asia, Pacific economic growth amid global trade tension

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Rashid A Mughal

GLOBAL economic growth is presently under dark clouds due to man-made policies and deliberately created environments which hinder and stall rather than promote and flourish international trade thereby helping global economic growth. The signs of Recession in USA are getting more clearer and dominant, prompting Fed to cut interest rates twice within current year. Across the Atlantic, Brexit has played havoc with not only the UK economy but has seriously jolted the European power house — Germany and equally affected Italy, Greece, Portugal and Spain. The World Bank and IMF along with OECD have revised down wards the growth rate in Europe and USA, thrice during the last ten months and repeatedly warned of the fragility of future outlook. All of these institutions cite trade wars as the main reason for this bleak outlook and derailing the global economic growth. It is, however, interesting that much of the effects of these manmade crisis are affecting Europe and Americas while Asian economies do not seem to be showing signs of weakness of that magnitude. While the growth rate in Europe and USA is down to 2.6%, the Asian economies are still achieving a rate of almost 6-7% which in the present scenario is remarkable.
According to a recent Asian Development Bank report, developing Asia will maintain strong but moderating growth over 2019 and 2020, as supportive domestic demand counteracts an environment of global trade tensions. In a supplement to its Asian Development Outlook (ADO), ADB maintains growth forecasts for developing Asia at 5.7% in 2019 and 5.6% in 2020 unchanged from its April forecast. These growth rates are slightly down from developing Asia’s 5.9% growth in 2018, mainly due to uncertainties. Excluding the newly industrliazed economies of Hong Kong, China the Republic of Korea, Singapore and Taipei China the regional growth outlook has been revised down from 6.2% to 6.1% in 2019 and maintained at that rate in 2020.
Deepening trade tension between the People’s Republic of China (PRC) and the United States (US) remain the largest downside risk to this outlook, despite an apparent truce in late June that could allow trade negotiations between the two countries to resume. “Even as the trade conflict continues, the region is set to maintain strong but moderating growth” said ADB Chief Economist Mr. Yasuyuki Sawada. “However, until the world’s two largest economies reach agreement, uncertainly will continue to weigh on the regional outlook.” The growth outlook for East Asia in 2019 has been revised down to 5.6% because of slower than expected activity in the Republic of Korea. The sub region’s growth outlook of 5.5% for 2020 is unchanged from April. Growth for the sub region’s largest economy the PRC is also unchanged with forecasts of 6.3% in 2019 and 6.1% in 2020, as policy support offsets softening growth in domestic and external demand.
In South Asia the economic outlook is robust, with growth projected at 6.6% in 2019 and 6.7% in 2020, albeit lower that forecast in April. The growth outlook for India has been cut to 7.0% in 2019 and 7.2% in 2020 because the fiscal 2018 outturn fell short. The outlook for Southeast Asia has been downgraded slightly to 4.8% in 2019 and 4.9% in 2020 due to the trade impasse and a slowdown in the electronics cycle. In Central Asia, the growth outlook for 2019 has been revised up 4.3% on account of an improved outlook for Kazakhstan. Central Asia growth outlook of 4.2% for 2020 is slightly changed from earlier 4.3% . The growth outlook in the Pacific is 3.5% in 2019 and 3.9 in 2020. It remains unchanged as the subregion continues to rebound from the effect of Cyclone Gita and an earthquake in Papua New Guinea, the subregion largest economy.
The major industrial economy has had slight revisions to their growth forecasts with the US revised up 2.6% for 2019 and the Euro area revised down to 1.3%. The growth outlook for Japan is unchanged at 0.8% in 2019 and 0.6% in 2020. Developing Asia’s inflation projections were revised up from 2.5% to 2.6% for both 2019 and 2020, reflecting higher oil prices and various domestics factors such as the continuing outbreed of African swine fever in several Asia economies. ADB is committed to achieving prosperous inclusive resilient and … sustainable Asia and the Pacific while sustaining its efforts to eradicate extreme poverty. In 2018, it made a commitment of new loans and grants amounting to $ 21.6 billion. ADB was established in 1966 and is owned by 68 members-49 from the region.
Of the many successes in Asia in recent times, China stands out. The country is by its sheer size economic giant and while it grows at the rates observed in recent years, it is obvious that its transformation will have profound effect, not just internally but for the rest of the world. Such effects, already in evidence, are a combination of new market opportunities arising from enhanced purchasing power and greater competitiveness of these mega-economies as producer of selected products. It is important to assess the likely impact in order to put in place policies and strategies that anticipate the changes so as to best capitalize on emerging opportunities, while also attenuating whatever anomalies could arise in subsectors that cannot meet the challenges.
It is clear that the rising incomes in China will continue to create pressure for structural reforms of agriculture/rural development and food sectors to cope with changing demand size and evolving consumer tastes. According to a United Nations report, changing incomes will also offer expanded two-way trade opportunities with countries in the region and the rest of the world. The continued growth of China, Indonesia, Bangladesh, Singapore, Vietnam, Laos and Cambodia will, therefore, significantly affect the balance and direction of trade, trading opportunities and level playing field for countries in the region. The report calls for timely diagnosis of the growth pattern in these emerging economies in order to put policies in place to optimize gains and minimize losses and marginalization.
— The writer is former DG (Emigration) and consultant ILO, IOM.