GROWTH IN East Asia and the Pacific is projected to ease to 6.2 per cent in 2017 as slowing growth in China is moderated by a pick-up in the rest of the region, while Thailand’s gross domestic product will expand by 3.2 per cent, according to a World Bank report.
The report released on Tuesday said macroeconomic policies were expected to support key domestic drivers of growth despite softness of external demand and overcapacity in some sectors. Excluding China, GDP growth in the region is seen advancing at a more rapid 5 per cent rate. China alone is anticipated to slow to 6.5 per cent in the year.
In China, the largest economy of the area, output expanded at by 6.7 per cent last year. Policy-supported infrastructure investment has partly offset a decline in private investment and the services sector has overtaken industry as a driver of growth. Financial markets have remained stable since February 2016. Capital outflows have eased, but remain sizeable.
GDP growth among commodity-exporting economies in the region is forecast to accelerate. Indonesia is anticipated to pick up to 5.3 per cent in 2017 from 5.1 per cent in the year just ended thanks to a rise in private investment.
Malaysia is expected to accelerate to 4.3 per cent in 2017 as adjustment to lower energy prices eases and as commodity prices stabilise. However, the growth outlook has deteriorated in several small commodity exporters, such as Mongolia and Papua New Guinea, where the terms-of-trade shock has exacerbated domestic vulnerabilities.
Among commodity importers, growth in Thailand should remain steady at 3.2 per cent in 2017, helped by improved confidence and accommodative policies. Vietnam is expected to accelerate to 6.3 per cent in 2017 from 6 per cent last year as demand is supported by strong foreign direct investment and manufacturing exports.
Growth in the Philippines is projected to remain around 6.9 per cent on average in 2017-18 helped by infrastructure investment and strong consumption, with additional support from revenue from service exports.
Growth in the rest of the region was close to its long-term average as robust domestic demand countered weaker external demand. Low and declining inflation enabled central banks in the region to ease or maintain accommodative monetary policy stances last year.
Growth picked up in commodity importers, led by the Philippines and Thailand.
Risks have tilted further to the downside since mid-2016 and include heightened policy uncertainty in advanced economies (Europe and the United States) amid a rise in support for trade protection.
Financial-market disruption and weak growth in advanced economies would pose further risks to Asia-Pacific growth. Rising political opposition to trade has contributed to a post-crisis high in new trade restrictions in the past year.
The imposition of trade barriers by major trading partners would disproportionately affect the relatively more open economies of East Asia and the Pacific.
An unexpected deceleration of major economies in the region or weaker-than-expected global trade would dampen growth in the region, and a faster-than-expected slowdown in China would have sizeable regional spillovers.
Similarly, an adverse reaction to the US Federal Reserve’s anticipated rise in interest rates or an increase in global risk aversion could also slow growth. The large, financially integrated economies of the region with sizeable external, foreign-currency denominated, and/or short-term debt – such as Indonesia, Malaysia and, to a lesser degree, Thailand – would be most exposed.
Meanwhile, global economic growth is forecast to accelerate moderately to 2.7 per cent in 2017 after a post-crisis low last year as obstacles to activity recede among emerging-market and developing-economy commodity exporters, while domestic demand remains solid among emerging and developing commodity importers.