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Global growth dependent on Asia

April 6, 2017

It's a group of emerging economies in Asia that will be the main driver of global growth in the next two years ahead, the Asian Development Bank has said in a new report. But are looming risks really factored in?

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Truck production in India
Image: Daimler AG

Economic growth in the Asia Pacific may ease slightly in 2017 and 2018, but the region will remain the single largest contributor to global expansion, the Asian Development Bank (ADB) says in its flagship Asian Development Outlook report.

ADB officials noted Thursday that the regions combined gross domestic product was projected to expand by 5.7 percent in both 2017 and 2018.

"Excluding the high-income newly industrialized economies of South Korea, Singapore, Taiwan and Hong Kong, regional growth is expected to reach 6.3 percent in 2017 and 6.2 percent in 2018," the report said.

It added that growth was picking up in 30 of the 45 economies in developing Asia, supported by higher external demand and rebounding commodity prices.

Downplaying the risks involved?

ADB Chief Economist Yasuyuki Sawada pointed out that "Asia Pacific will still account for an estimated 60 percent of global economic growth" in the years ahead despite the region - and particularly China - adjusting to a more consumption-driven model.

Environmental standards could hamper development

The ADB warned of a number of uncertainties that might impact current calculations. The Manila-based lender said that as the US economy continued to strengthen, expectations were for the Federal Reserve to raise interest rates further this year.

Higher Fed borrowing costs tend to hit emerging economies as it means that investors are likely to withdraw some of their cash to seek better and safer returns in the US.

The ADB study also pointed to lingering worries about US President Donald Trump wanting to revise a number of trade deals, fueling speculation he might spark bilateral trade wars.

But "while uncertain policy changes in advanced economies do pose a risk to our outlook, we feel that most economies are well positioned to weather potential short-term shocks," Sawada argued.

hg/jd (AFP, dpa)