Asia-Pacific growth to decline in 2012, but remains growth pole of world economy

Commodity price volatility is another major concern for the region which also faces a long-term trend of rising commodity prices, says the Economic and Social Survey of Asia and the Pacific 2012: Pursuing shared prosperity in an era of turbulence and high commodity prices, the flagship publication of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

The growth rate of the region’s developing economies is projected to slow down to 6.5 per cent in 2012 from 7.0 per cent last year, compared to a strong 8.9 per cent in 2010, estimates the annual ESCAP report. However, the slowdown in growth will help lower inflation in Asia and the Pacific which is projected to moderate from 6.1 per cent in 2011 to 4.8 per cent this year.

“The Asia-Pacific region continues to face a challenging external environment, which is why the focus of the 2012 Survey is to map the landscape to help steer through turbulence and volatility. This Survey provides a valuable tool to pursue a sustainable pathway for shared prosperity in Asia-Pacific,” said United Nations Under-Secretary-General and Executive Secretary of ESCAP, Dr. Noeleen Heyzer while launching the Survey in Bangkok.

Asia-Pacific to remain global growth engine

Reduced demand in the region’s traditional export markets resulting from the eurozone debt crisis and continued economic uncertainty in the United States of America, together with higher capital costs and loose monetary policies of some advanced economies will contribute to the slowing of Asia-Pacific growth in 2012, notes the Survey.

Despite the slowdown, the region will remain the world’s fastest growing with China forecast to grow at a robust 8.6 per cent, decelerating from the 9.2 per cent rate of 2011. Growth in India is projected at 7.5 per cent in 2012, up from 6.9 per cent in the last fiscal year.

“Growth in Asia and the Pacific remains better than in any other region – continuing as an anchor of stability and a new growth pole for the world economy. South-South trade with Asia-Pacific in 2012 will help other developing regions, such as Africa and Latin America, further reduce their dependence on low-growth developed economies,” Dr. Heyzer said.

Policy challenges and options

The Survey highlights a number of key policy challenges and options for Asia-Pacific countries – amongst them: managing the balance between growth and inflation, using several inflation fighting measures beyond monetary policy alone; coping with capital flows and dealing with considerable exchange rate volatility, and; addressing jobless growth and unemployment by encouraging domestic consumption to act as an enhanced engine of growth and productivity, improving working conditions and income equality.

South East Asia growth improves in 2012 as Thailand sees strong post-flood recovery

Although many economies in South-East Asia are severely affected by the global downturn, the subregion is forecast to see a slight increase in growth to 5.2 per cent, driven by strong recovery in Thailand following the devastating floods in the country last year.

ESCAP projects growth in East and North-East Asia to slow to 7.1 per cent from 7.6 per cent in 2011, while North and Central Asia is forecast to experience a relatively modest decline in growth to 4.3 per cent in 2012, thanks to high energy prices. Lower aggregate growth of 5.7 per cent is projected for Pacific island developing economies in 2012, due mainly to lower growth in Papua New Guinea.

Growth in South and South-West Asia is forecast to remain constrained at 5.8 per cent in 2012, largely due to inflation fighting monetary tightening, as compared to 6.7 per cent in 2011.

Learning to live with high commodity prices

The Survey analyses short- and medium-term challenges facing the region, highlighting the trend of rising commodity prices. In addition to price volatility, the Asia-Pacific region must deal with a long-term trend of rising commodity prices, driven by rapid growth in emerging economies.

“This commodity boom presents risks and opportunities. Less-developed economies should resist the impulse towards commodity specialization, which in turn can delay industrialization, economic diversification, and the building of productive capacities,” Dr. Heyzer said.

“Tight global supply coupled with financial speculation in the commodity markets, global liquidity and non-economic supply shocks, such as political instability in oil-producing countries, are likely to produce a ‘new normal’ of persistent volatility and a long-term rise in commodity prices,” Dr. Heyzer said in her preface to the Survey.

Making growth inclusive

Another priority for the region is to make growth more inclusive. Levels of income inequality have grown by a worrying 15 per cent in developing Asia-Pacific economies since the 1990s.

“Social progress in Asia and the Pacific has been hampered by increasing income inequality. Achievement of measures of the health-related and educational aspects of human development, when adjusted for inequality, is considerably lower for many countries in the region, ranging from a potential loss in achievement of 10 per cent to 30 per cent,” Dr. Heyzer said.

More than 1 billion workers in the region are in vulnerable employment with developing countries failing to generate sufficient work opportunities in the formal sector, notes the Survey. Young people are three times more likely to be unemployed than adults with the region’s youth unemployment rate projected to remain at 10.2 per cent in 2012.

“The good news is that most countries are in a favourable position to undertake a wide range of actions to stimulate and rebalance growth to make it more durable and better serve those most in need,” Dr. Heyzer said.

Please find the Economic and Social Survey of Asia and the Pacific 2012 at: http://www.unescap.org/survey2012