Asia to stay world’s fastest growing region by 2030
The global economy is continuing its gradual recovery from the financial crisis, with the latest data pointing to a broad-based pickup. However, longer term Asia is seen maintaining its position as the fastest-growing region, with China and India leading the charge.
The Organization for Economic Cooperation and Development’s latest “Economic Outlook” report suggests fiscal and monetary stimulus has underpinned a synchronized improvement in growth rates across most countries. The Paris-based organization forecasts a 3.6% global expansion this year, rising to 3.7% in 2018, albeit still below the pre-crisis period and that of past recoveries, The Diplomat reported.
For the Asia-Pacific region, the OECD projected further expansion for the region’s largest economies. China is expected to post a 6.8% rise this year, although easing to 6.6% in 2018 and 6.4% in 2019 as the authorities “rebalance” the growth model for the world’s second-largest economy.
Japan, the world’s third-largest economy, is seen extending its longest expansion in nearly two decades with a 1.5% GDP rise this year. This would be followed by around 1% growth for the next two years, amid an expected consumption tax hike and declining labor force.
South Korea is seen sustaining growth at around 3% through 2019, helped by stronger global trade and greater fiscal support, although high household debt and weak employment growth could weigh on consumption.
Among the emerging stars, India is expected to surge from 6.7% GDP growth this year to 7% in 2018 and 7.4% in 2019, due to further reforms that are seen boosting investment, productivity and growth.
Indonesia should also enjoy steady growth around 5%, with rising household incomes supporting increased consumption.
Australia is seen posting a growth pickup from 2.5% in 2017 to 2.7% next year, extending its record-beating economic winning streak. However, the OECD expects its central bank to start hiking rates from the second half of 2018, with the economy vulnerable to “too big to fail” risks due to its indebted household sector and concentrated banking industry.
Digital Economy
Asia’s tech economies are growing faster than those elsewhere. China is already the world’s largest e-commerce market with 40% of the value transactions, or 11 times as much as the US, according to McKinsey Global Institute, Nikkei reported.
A 2016 report by Google and Singaporean investment company Temasek lumped Indonesia, Malaysia, Singapore, Thailand, Vietnam and the Philippines together as the world’s fastest growing digital economy.
The Google/Temasek report suggested that the total value of those countries’ digital economies could hit $200 billion—almost the same as Vietnam’s 2015 GDP—by 2025, with Indonesia expected to be worth $81 billion of that. Grace Citra Dewi, a researcher at the Center for Strategic and International Studies, a Jakarta think tank, estimates that “for every percent increase in mobile penetration it will add $640 million to the GDP.”
Aiming even higher, Indonesian President Joko Widodo wants a digital economy worth $130 billion by 2020—despite the fact that only around 20-25% of Indonesians have regular internet access.
Though there is a big difference between $80 billion by 2025 and $130 billion five years sooner, the disparity is not necessarily down to a politician making plenteous promises.
Economic Integration
The Asian Development Bank released a report earlier on Asian Economic Integration and commented on the lessons learned after the Asian financial crisis 20 years ago.
It stated that growing trade and investment linkages in Asia and the Pacific have helped to improve the region’s economic resilience to uncertainties in the global economic environment. Asia’s intraregional trade rose in 2016 and acted as a buffer against headwinds from uncertainties in global trade and policy. Sub-regional trade integration was strongest in East Asia, followed by Southeast Asia and Central Asia.
Amid a decline in global foreign direct inflows to Asia, intraregional investment flows continued to rise, increasing as a share in total FDI to 55% in 2016 from 48% in 2015. In fact, Asian economies have continued expanding their global presence with foreign direct investment originating from Asia rising through investment in renewable energy, natural resources, semiconductors and information technology.
The report stated that Asia and the Pacific is leading a recovery in world trade that will help the region to maintain strong growth momentum.
Source: Financialtribune
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