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Asia’s growth forecast upgraded after Phase One deal: AMRO

MACROECONOMICS surveillance organisation Asean+3 Macroeconomics Research Office (AMRO) has upgraded its growth forecast for Asia just a month after its previous prediction, thanks to the signing of a Phase One trade deal between the United States and China following nearly two years of dispute.

AMRO projects full-year growth for the Asean region, China, Japan and Korea to hit 4.9 per cent in 2020, its chief economist Khor Hoe Ee said during an outlook briefing on Friday.

This revision comes just a month after the last projection in December predicted 4.7 per cent growth.

"The important thing is that without Phase One, you would have had the tariffs on Dec 15," Dr Khor said, when asked if the truce made a real difference to the trade war. "The other is of course the reduction in tariffs on the ones that were imposed in October."

He added that this is significant enough for AMRO to raise its growth outlook by 0.2 percentage point.

Dr Khor was however less rosy about a Phase Two deal, describing it as a "black hole", adding that a Phase 1.5 could be a possibility if the US and China achieve enough to come to some agreement.

He said many observers consider Phase Two to be "difficult" as it involves commitments that China "would have difficulty delivering". In addition, they are expecting negotiations to continue after the US presidential election, scheduled for Nov 3.

"Our view is that we should be cautiously optimistic because the election and Phase One provide breathing space for everyone, so take advantage of this time to consolidate, do structural reforms and build up capacity," Dr Khor added.