Finance Industry & Trade Markets

Global Trade Boosts Asian Economy

Global trade recovery, economic expansion in developed countries, and a better economic outlook in China have become catalysts for Asian economies in 2017 to 2018. Asian Development Bank (ADB) is projecting Asia’s Gross Domestic Product (GDP) to grow by 5.9 percent in 2017 and 5.8 percent in 2018.

Yasuyuki Sawada, Chief Economist of ADB, said that in the period of January to May 2017, the export value of Asian countries grew by 11 percent YoY while imports increased by 17 percent. This increase occurred after the exports value in the previous two years shrank due to declining commodity prices and sluggish demand in the manufacturing sector. In addition to China, eight other countries with the largest economy in Asia also recorded a real rise in manufacturing exports.

ADB revised its economic growth projection from 6.5 to 6.7 percent in 2017. South Korea’s economy is also predicted to increase by 2.8 percent, higher than the previous projection of 2.5 percent. Projected economic growth in Indonesia and Thailand is maintained at 5.1 percent and 3.5 percent, respectively. India’s economic projection is lowered from 7.4 to seven percent. Meanwhile, the Philippine economic growth is predicted to increase from the previous 6.4 percent to 6.5 percent.

“Asian countries should take advantage of these short-term economic prospects to reform and improve productivity, invest in infrastructure, and maintain sound macroeconomic management in order to increase long-term growth potential,” said Sawada in the Asia Development Outlook Update 2017.

ADB also highlights the balance risks in the Asia and Pacific region. The easing of fiscal policy in the United States (US) and weakening world oil prices could potentially raise the outlook. On the other hand, there are risks to be aware for tightening global liquidity, economic disturbances due to geopolitical conflicts or disasters caused by bad weather.

“Asia Pacific is more prepared to face the risk of ending quantitative easing in the US but high levels of debt in the region pose risks to financial stability,” said Sawada. This is due to long-term interest rates in some Asian countries related to US interest rates. Therefore, policymakers must strengthen their financial condition and monitor the level of debt and asset prices in their country. (*)

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Hari Widowati

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