UN report: East Asia remains world’s most dynamic region

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East Asia will remain the world’s most dynamic and fastest growing region, the robust short-term growth outlook driven by resilient domestic demand and an improvement in exports, according to the United Nations World Economic Situation and Prospects (WESP) 2018 Report.

The favorable outlook is also supported by accommodative monetary policy and expansionary fiscal stances across most countries.

The forecast comes amid an upturn in the global economy, which WESP said is now growing by about 3%.

Following growth of 5.9% in 2017, the East Asian region is projected to expand at a steady pace of 5.7% in 2018 and 5.6% in 2019. Nevertheless, the region faces several downside risks, arising mainly from high uncertainty in the inter­national policy environment and elevated debt levels.

Private consumption will remain the key driver of growth in East Asia, supported by modest inflationary pressures, low interest rates, and favorable labor market conditions. In addition, public investment is likely to remain strong in most countries as governments continue to embark on large infrastructure projects, aimed at alleviating structural bottle­necks. Amid rising capacity utilization rates, private investment activity is also expected to pick up, particularly in the export-oriented sectors.

The recovery in East Asia’s exports is being large­ly driven by growing intraregional demand. Improving demand from the developed coun­tries, particularly the United States and Europe, is also propelling regional exports, amid the gradual revival in investment in these economies.

More specifically, the region is experiencing a strong rebound in exports of electrical and electronic goods, amid the upturn in the global electronics cycle. In the outlook period, export growth is expected to temper, given waning base effects. However, a continued expansion in external demand will generate positive spillovers to the domestic economy through the income and investment channels.

China

In China, growth is expected to remain solid, underpinned by favorable domestic demand and accommodative fiscal measures. Amid ongoing economic rebalancing efforts, growth will moderate at a gradual pace from 6.8% in 2017 to 6.5% in 2018 and 6.3% in 2019. Private consumption remains the main driver of growth, as reflected in the continued strong increase in sales of consumer goods in 2017.

Korea

South Korea is projected to grow at a sustained pace of 2.8% in 2018 and 2019, following an estimated growth of 3.0% in 2017. Nevertheless, geopolitical tensions in the Korean Peninsula will continue to adversely affect investor sentiments and domestic financial markets. Trade tensions with China also pose a risk to the exports outlook.

Taiwan

Following subdued growth of 1.5% in 2016, growth in Taiwan picked up to 2.2% in 2017, and is projected to strengthen further to 2.4% in 2018. The favorable growth outlook is also reinforced by the announcement of a fiscal stimulus program in early 2017 that includes the implementation of large infrastructure projects and measures to promote job creation.

Singapore

Growth in Singapore accelerated from 2.0% in 2016 to 3.0% in 2017, as the strong expansion in exports boosted activity in the manufacturing and logis­tics sectors. In 2018 and 2019, the Singaporean economy is projected to expand at a steady pace of 2.7%.

ASEAN

The favorable growth outlook for the large economies in the Association of South­east Asian Nations (ASEAN) is underpinned by robust domestic demand conditions, amid improving external demand and a modest recovery in commodity prices.

In the Phil­ippines, growth is projected to gain further traction, rising from 6.7% in 2017 to 6.9% in 2018 and 2019. Private consumption, which accounts for nearly 70% of GDP, is expected to sustain a healthy momentum, driven by large remittance inflows and buoyant consumer confidence. Fixed investment growth is also projected to remain strong, as the authorities continue to embark on large infrastructure development projects. In addition, the planned introduction of tax reform measures is expected to support the increase in public expenditure.

Following stronger-than-expected growth of 5.4% in 2017, growth in Malaysia is projected to remain relatively steady at 4.9% in 2018 and 5.0% in 2019. In tandem with the growth recovery in key trading partners, Malaysia’s exports saw a broad-based rebound in 2017. While this strong export momentum is likely to moderate in the outlook period, growth in the Malaysian economy will be underpinned by robust domestic demand.

In Thailand, GDP growth picked up to 3.5% in 2017, as a robust expansion in private consumption and exports more than offset the weakness in private investment. Going forward, the Thai economy is projected to register growth of 3.4% in 2018, supported by a pickup in public investment that largely offsets weaker investment in the private sector.

In Indonesia, the growth outlook remains stable against a backdrop of steady growth in private consumption and public expenditure. Growth is projected to improve slightly from an estimated 5.2% in 2017 to 5.3% in 2018, as addi­tional monetary policy easing measures lend support to businesses and private investment activity.

Meanwhile, the positive growth outlook for Vietnam is underpinned by buoyant FDI inflows, particularly in the electronics sector, as well as strong tourism revenue.

LDCs

The least developed countries (LDCs) in ASEAN, namely Cambodia, Lao, and Myanmar, are projected to continue achieving growth rates of above 7.0% in 2018 and 2019, as incomes rise from relatively low bases. Strong infrastructure investment, particularly in the energy and transportation sectors, is also boosting growth in these economies. Growth is also benefiting from the improvement in external demand, especially from within the Asian region. Nevertheless, low levels of productivity, amid shortfalls in essential infrastructure continue to pose a challenge to medium-term growth prospects and to making significant progress towards the SDGs.

Pacific Islands

Meanwhile, the Pacific Island economies, including Kiribati, Papua New Guinea, the Solomon Islands and Vanuatu, are expected to grow at a steady pace in the forecast period. The positive outlook is supported by continued growth in revenues from the agriculture, mining, fisheries and tourism industries. Looking ahead, the region faces considerable downside risks to its growth outlook, mainly arising from high uncertainty in the external environment.

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