Outlook for Asia: Preparing for choppy seas

THE outlook for Asia and the Pacific is the strongest in the world, but it is shrouded by challenges at home and abroad, according to the latest International Monetary Fund (IMF) report for the region.

The April 2017 report, Regional Economic Outlook for Asia and Pacific: Preparing for Choppy Seas, finds that policy stimulus continues to support healthy domestic demand in China and Japan in the near term, which is good for other economies in Asia as well. Broader global conditions are also favourable. Growth is accelerating in many major advanced and emerging market economies, notably the United States and commodity exporters, and financial markets are still resilient for the most part. Nonetheless, there are challenges ahead. Particularly, over the medium term, there are fundamental headwinds to sustained strong growth, including from ageing populations in some countries and a slower catch-up in productivity.

After a slowdown in 2016, regional growth is forecast to speed up in 2017. Growth in the region decelerated to 5.3 per cent in 2016 from 5.6 per cent in 2015 despite broad improvement in economic activity in the second half of 2016. Net exports continued to pull down growth; domestic demand remained strong, supported by robust private consumption. GDP growth is forecast to reach 5.5 per cent in 2017, revised up by 0.1 percentage point compared to the estimate in the IMF's October 2016 World Economic Outlook, and 5.4 per cent in 2018. Accommodative policies will underpin domestic demand, offsetting tighter global financial conditions. The acceleration in 2017 reflects expected recovery in Asian trade, resilient domestic demand, and continued policy support.