Further slowdown in Asia-Pacific growth in 2012 on declining exports,
but region to remain growth pole of world economy
Commodity price volatility a critical challenge, says ESCAP flagship publication
New Delhi (UN ESCAP Strategic Communications and Advocacy Section) – Asia and the Pacific faces another year of slowing growth as demand for its exports falls in developed nations and capital costs rise, but the region will remain the anchor of global economic stability, according to latest United Nations projections released here today.
Commodity price volatility is another major concern for the region which also faces a long-term trend of rising commodity prices, says the Economic and Social Survey of Asia and the Pacific 2012: Pursuing shared prosperity in an era of turbulence and high commodity prices, the flagship publication of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
The growth rate of the region’s developing economies is projected to slow down to 6.5 per cent in 2012 from 7.0 per cent last year, compared to a strong 8.9 per cent in 2010, estimates the annual ESCAP report. However, the slowdown in growth will help lower inflation in Asia and the Pacific which is projected to moderate from 6.1 per cent in 2011 to 4.8 per cent this year.
“The Asia-Pacific region continues to face a challenging external environment, which is why the focus of the 2012 Survey is to map the landscape to help steer through turbulence and volatility. This Survey provides a valuable tool to pursue a sustainable pathway for shared prosperity in Asia-Pacific,” said United Nations Under-Secretary-General and Executive Secretary of ESCAP, Dr. Noeleen Heyzer while launching the Survey in Bangkok.
Asia-Pacific to remain global growth engine
Reduced demand in the region’s traditional export markets resulting from the eurozone debt crisis and continued economic uncertainty in the United States of America, together with higher capital costs and loose monetary policies of some advanced economies will contribute to the slowing of Asia-Pacific growth in 2012, notes the Survey.
Despite the slowdown, the region will remain the world’s fastest growing with China forecast to grow at a robust 8.6 per cent, decelerating from the 9.2 per cent rate of 2011. Growth in India is projected at 7.5 per cent in 2012, up from 6.9 per cent in the last fiscal year.
“Growth in Asia and the Pacific remains better than in any other region – continuing as an anchor of stability and a new growth pole for the world economy. South-South trade with Asia-Pacific in 2012 will help other developing regions, such as Africa and Latin America, further reduce their dependence on low-growth developed economies,” Dr. Heyzer said.
Policy challenges and options
The Survey highlights a number of key policy challenges and options for Asia-Pacific countries – amongst them: managing the balance between growth and inflation, using several inflation fighting measures beyond monetary policy alone; coping with capital flows and dealing with considerable exchange rate volatility, and; addressing jobless growth and unemployment by encouraging domestic consumption to act as an enhanced engine of growth and productivity, improving working conditions and income equality.
Another priority for the region is to make growth more inclusive. Levels of income inequality have grown by a worrying 15 per cent in developing Asia-Pacific economies since the 1990s.
“Social progress in Asia and the Pacific has been hampered by increasing income inequality. Achievement of measures of the health-related and educational aspects of human development, when adjusted for inequality, is considerably lower for many countries in the region, ranging from a potential loss in achievement of 10 per cent to 30 per cent,” Dr. Heyzer said.
More than 1 billion workers in the region are in vulnerable employment with developing countries failing to generate sufficient work opportunities in the formal sector, notes the Survey. Young people are three times more likely to be unemployed than adults with the region’s youth unemployment rate projected to remain at 10.2 per cent in 2012.
“The good news is that most countries are in a favourable position to undertake a wide range of actions to stimulate and rebalance growth to make it more durable and better serve those most in need,” Dr. Heyzer said.
India’s strong economic fundamentals ensure steady performance
“The year 2011-2012 turned out to be a difficult year for the Indian economy as it faced the twin shocks of global slow down and having to withstand the impact of severe monetary tightening. To curb the inflationary expectations, the RBI raised policy rates 13 times in 18 months. This affected industrial investment. Yet the Indian economy managed to grow at a robust rate of 6.9 per cent” said Dr. Nagesh Kumar, Chief Economist and Director of the Subregional Office for South and South-West Asia of ESCAP at a launch held earlier today at the UN Conference Hall, New Delhi.
“The Indian economy’s strong fundamentals, namely high saving and investment rates and rapidly expanding labour force and middle class will ensure a steady economic performance with some volatility in GDP growth rates from year to year,. There are indications that the economy is turning around as core sectors, including manufacturing, show signs of recovery. “We expect it to expand by about 7.5 per cent in 2012-2013”, Dr. Kumar said.
The launch in New Delhi was a part of a series of events organized across Asia-Pacific to mark the release of the Survey, with eight events held simultaneously in South and South-West Asia. Dr. Kaushik Basu, Chief Economic Advisor, Ministry of Finance, Government of India was Chief Guest on this occasion.
"Over the years, the ESCAP Survey has carved a very unique position for itself, as one of the few reports that combine rigorous economic analysis with an in-depth social perspective, in an integral fashion", stated Dr. Kaushik Basu. "In the current challenging global economic environment, the Asia-Pacific region and India in particular have a special responsibility and a major role to play, as a balancing force to offset risks of economic shocks from other regions, such as the Eurozone…” , he noted.
Please find the Economic and Social Survey of Asia and the Pacific 2012 at: http://www.unescap.org/survey2012
To view the programme of the launch in Delhi, please click here