Southeast Asia is expected to see growth accelerate, led by a recovery in Thailand and strong public spending in the Philippines, according to the Asian Development Bank.
This buoyancy is set to continue on the back of robust consumption, rising investment and increased intraregional trade, with GDP growth projected at 5.4 per cent in 2013 and 5.7 per cent in 2014. The impending startup of the ASEAN Economic Community in 2015 will enlarge trade volumes within this bloc of dynamic economies, helping to diversify export markets.
ADB’s flagship annual economic publication, Asian Development Outlook 2013 (ADO 2013), released today, forecasts gross domestic product (GDP) growth in developing Asia of 6.6 per cent in 2013 and 6.7 per cent in 2014. In 2012, the region grew 6.1 per cent.
Rising private consumption and stronger intraregional trade will spur a pickup in growth in developing Asia in 2013 and 2014, as economic activity in the US and Europe remains in the doldrums, the Asian Development Bank (ADB) says in a major new report.
“The rebound in People’s Republic of China (PRC) and solid momentum in Southeast Asia are lifting the region’s pace after the softer performance of 2012,” said ADB Chief Economist Changyong Rhee. “Domestic spending, in particular consumption, is the main driver of the recovery, and is a welcome shift from the reliance on the markets of advanced economies.”
The report warns that political risks linked to wrangling over the US debt ceiling, fatigue over tough austerity measures in the eurozone, and long simmering tensions over border disputes in Asia present the main threats to the near term outlook. It notes that the region’s favorable fiscal position cannot be taken for granted, with improved revenue efficiency, better governance, and other longer-term structural issues needing to be addressed.
The report projects stronger economic activity to spur renewed price pressures, with inflation seen moving up from 3.7 per cent in 2012 to 4.0 per cent in 2013 and 4.2 per cent in 2014. These pressures remain manageable for now, but will need to be monitored closely, especially as strong capital inflows raise the specter of potential asset market bubbles.
Across the subregions, East Asia will set the pace with the highest projected growth of 7.1 per cent in 2013 and the same in 2014. China - the world’s second largest economy - is forecast to expand 8.2 per cent in 2013 on the back of rising domestic demand and improved exports, with spillover benefits for neighbouring economies. Growth will edge back slightly to 8.0 per cent in 2014 as the government moves to cool pressure on the environment and to address income inequality.
South Asia will see a turnaround after two years of economic softening, with growth estimated at 5.7 per cent in 2013 and 6.2 per cent in 2014. India will lead the upturn, with projected growth of 6.0 per cent and 6.5 per cent, but the world’s second most populous country is still struggling to realize its full potential, with structural and policy issues inhibiting investment.
Higher public spending, particularly in Kazakhstan and Azerbaijan, will boost Central Asia, with projected growth of 5.5 per cent in 2013 and 6.0 per cent in 2014. The completion of some major public construction projects, including a large liquefied natural gas pipeline in Papua New Guinea (PNG), will see growth in the Pacific cool slightly to 5.2 per cent in 2013. Growth in the Pacific is expected to bounce back to 5.5 per cent in 2014 as exports commence from the PNG pipeline and elsewhere in the subregion new public construction activity gets under way, including post-cyclone reconstruction work. A promising pickup in tourist numbers should also benefit some smaller Pacific economies.