Lawrence Yeo

Prospects for east Asia in 2018 are mixed but generally positive, according the World Bank. Lawrence Yeo reports.

The World Bank projects that growth prospects for 2017 and 2018 remain positive for developing east Asia and the Pacific. Favourable external factors include stronger growth in advanced economies, a moderate recovery in commodity prices, and a strengthening of global trade growth.

Regional growth is expected to slow from 6.4% in 2017 to 6.2% in 2018, reflecting China’s gradual slowdown. In the rest of the region, including Association of South-east Asian Nations economies, growth in 2017 will be slightly faster at 5.1% in 2017 and 5.2% in 2018 – up from 4.9% in 2016.

Robust growth will mean that poverty is expected to continue to fall across Asia. Larger economies are expected to fare well. China’s gradual rebalancing away from investment and towards domestic consumption will continue, with growth projected to slow to 6.4% in 2018 and 2019.

Thailand and Malaysia are expected to grow more rapidly than expected, due to stronger exports and tourism for the former, and increased investment in the latter.

Indonesia’s gains in real wages are fuelling strong consumption, while Vietnam’s growth is boosted by a rebound in agriculture and manufacturing. The Philippines’ economy is projected to expand at a slightly slower pace than in 2016, partly due to the slower-than-expected implementation of public investment projects.

The outlook for smaller countries is mixed. Mongolia is expected to fare better in 2017 to 2018, while its macroeconomic stabilisation programme is encouraging new FDI in mining and transport. Growth in Cambodia and Laos is moderating compared with 2016, but its pace remains higher than other countries in the region. The power sector in Laos and trade and FDI in Cambodia are the main economic drivers.

Several external and domestic risks could impact this positive outlook. Inequality is high and on the rise. Uncertainty remains about economic policies in some advanced economies, and geopolitical tensions are escalating. Monetary policies in the US and the euro area could be tightened more quickly than expected.

Many countries in the region also have vulnerabilities in their financial sectors, with high levels of private sector debt or deteriorating asset quality. In several countries, fiscal deficits are high or on the rise. Much depends on new government policies and measures. Deepening regional integration, trade liberalisation and non-tariff barriers reduction may help offset the risks of protectionism.

As for growing tourism, closer collaboration between governments and the private sector can address adverse environmental and social impacts.

Lawrence Yeo is CEO of AsiaBIZ Strategy, a Singapore-based consultancy that provides Asia market research and investment/trade promotion services. 

This article is sourced from fDi Magazine
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