Global trade war and rising protectionism taking toll on Asia Pacific, SEA remains bright spot
The global trade war and rising protectionism has taken its toll on Asia Pacific's economic growth, with fears of a slowdown in the US economy entering the list of top five risks according to a new report by the Pacific Economic Cooperation Council (PECC).
Specifically, the fourteenth annual State of the Region report found that regional economic growth is expected to slow from 3.8 per cent in 2018 to 3.3 per cent this year.
The region's emerging economies are expected to grow by 5.2 per cent this year, a marked deceleration from the 5.7 per cent growth seen in 2017, before posting slightly improved growth of 5.3 per cent in 2020. Meanwhile, advanced economies are expected to grow by 2 per cent in 2019 and continue that deceleration into 2020.
On a global level, the mood across the region has soured with expectations for global growth turning "distinctively" negative. Only 9 per cent of the 627 regional policy experts surveyed expect the global economy to strengthen next year, with 68 per cent expecting somewhat or much weaker growth.
Despite the sour outlook, the regional policy community remain optimistic about the prospects for growth in Southeast Asia over the next year.
"Forty-two per cent of respondents to our survey are bullish on Southeast Asia - we can speculate on the reasons for this - there is strong momentum towards integration in the region with the ASEAN Economic Community, many of them are in a demographic sweet spot; and there may be some expectations of trade diversion," said Eduardo Pedrosa, coordinator of the report.
The survey identified the following as the top five risks to regional growth in the coming two to three years: increased protectionism and trade wars; slowdown in world trade growth; a slowdown in the Chinese and US economy respectively, and lack of political leadership.
This list of risks remains the same as in 2018, with the exception of a slowdown in the US economy.
Notably, concerns over the impact of protectionism on economic growth have been steadily rising over the past few years.
The conflicts seen on the world stage come at a critical juncture for the world economy, noted the report. After a slow multi-year recovery from the 2008 Global Financial Crisis, the green shoots of economic growth are being weighed down by unprecedented policy risks and uncertainties.
The report also noted that the multilateral rules-based trading system is being further degraded in fundamental ways. Equally significant issues of inclusiveness, environmental stability and the onset of digital and technology revolution are also rising to the fore.
The report also pointed out that today, relations among key economies are marked by "a degree of suspicion and hostility not seen in over half a century". There is now a consistent view that neither industrialised and developing members of the Asia-Pacific Economic Cooperation (APEC) have met the Bogor Goals of achieving free and open trade in the Asia-Pacific.
In 1994, APEC leaders set the target of 2020 for the region to achieve free and open trade in the Asia Pacific; APEC will need to assess the progress made on this front, as well as set forth a new vision next year.
The report also looks at PECC's work to construct an index to measure connectivity in the region. Physical connectivity in the region accounted for 41 per cent of connectedness followed by institutional at 35 per cent and people at 24 per cent.