Asiapacific to Outpace the World

A Bernama Report today (13 October)opines that the Asia Pacific will likely experience a faster economic recovery than the global economy in 2010; with gross domestic product (GDP) growth speculated to expand by 3.5 per cent versus the forecasted 1.6 per cent growth for the world.

For this year, the region’s GDP was expected to contract by 0.9 per cent, less than the 2.7 per cent contraction forecast for the world, said the Asia Pacific Wealth Report released by Merril Lynch Global Wealth Management and Capgemini.

The report said there were signs that the region was emerging relatively quickly from the global slump and will ultimately suffer less severe detrimental effects from the crisis than other regions of the world.

Stronger-than-average growth in emerging Asia, notably China and India, the report said was likely to lessen the effect of global economic crisis in the region this year and significantly contribute to its overall growth next year.

“The 2008-2009 government policy response of both China and India, particularly fiscal stimulus, is expected to lend significant support to those economies in 2009-10.

“However, growth in India could be undermined by drought,” it said.

Below-normal monsoon rains this year have pushed around 40 per cent of the country’s districts into drought-like conditions, which are likely to affect farm output and trigger a sharp rise in food prices.

The report stated that the overall business outlook for the region also remained promising. The business environment in China and India were likely to improve significantly during the period of 2009-13.

For example, according to the Economist Intelligence Unit’s Business Environment Ranking, China ranked 11 places higher for the 2009-13 forecast period than it did for 2004-08.

Unemployment in the region was also expected to be lower than the global average. The report explained that efforts to increase employment were under way across the region, helping to underpin its independent economic recovery.

“Domestic-demand growth in Asia Pacific region is likely to outpace the average domestic-demand growth in the world consistently during the period of 2009-2013, and would help in faster economic recovery of the region,” the report said.

It said this demand was likely to be experienced by China and India, forecast to grow at a compound annual growth rate of 9.7 per cent and 7.9 per cent respectively during the same period.

Moving forward, the region could further focus on domestic-demand growth by building stronger social protection systems and reducing the pressure on individuals to save for their health, education and retirement needs.

Such efforts, the report added would help to increase consumer confidence and stimulate private consumption and enable domestic currencies to appreciate.

Will Asiapacific economies live up to this expectation? Let the next quarter of 2009 tell the story.