South­east Asia will be less ex­port de­pen­dent by 2017

The Pak Banker - - Front Page -

KUALA LUMPUR

South­east Asia's growth will re­main re­silient over the next five years as stronger in­vest­ment and pri­vate con­sump­tion re­duce de­pen­dence on ex­ports for ex­pan­sion, Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment said.

Europe's sov­er­eign debt cri­sis and a slow­down in ad­vanced economies have had a "lim­ited" im­pact on South­east Asian nations with most of the ef­fect ex­pe­ri­enced through trade, the Paris-based OECD said in a re­port re­leased in Phnom Penh to­day. The re­gion, along with China, may face risks stem­ming from volatil­ity of cap­i­tal in­flows in the medium term, it said.

The prospects for de­vel­op­ing Asian nations con­trast with the fis­cal and de­mo­graphic chal­lenges faced by more ad­vanced economies, as higher pub­lic spend­ing and younger pop­u­la­tions sup­port do­mes­tic de­mand and lure in­vest­ment even as global ex­pan­sion weak­ens. In­creased gov­ern­ment ex­pen­di­ture on so­cial safety nets and health will en­cour­age house­hold spend­ing and re­duce the need for pre­cau­tion­ary sav­ings in emerg­ing Asia, ac­cord­ing to the re­port.

"A com­bi­na­tion of cycli­cal fac­tors, gov­ern­ment poli­cies, and longer-term shifts in eco­nomic struc­ture that have sup­ported con­sump­tion growth over the past sev­eral years are likely to continue to un­der­pin its growth over the medium term in South­east Asia, China and In­dia," the OECD said in its 2013 out­look for the re­gion.

Gov­ern­ments in South­east Asia have loos­ened fis­cal poli­cies to spur growth. Philip­pine Pres­i­dent Benigno Aquino is in­creas­ing spend­ing to a record and seek­ing more than $16 bil­lion of in­vest­ments in roads and air­ports, while Malaysian Prime Min­is­ter Na­jib Razak is also boost­ing out­lays.

The re­gion's growth prospects are help­ing at­tract over­seas com­pa­nies, with Ja­pan's for­eign di­rect in­vest­ment in South­east Asia sur­pass­ing that in China, ac­cord­ing to Ja­pan Ex­ter­nal Trade Or­ga­ni­za­tion's fig­ures us­ing fi­nance min­istry data. Ja­pan's in­vest­ment in the As­so­ci­a­tion of South­east Asian Nations more than dou­bled to $19.6 bil­lion in 2011 from the pre­vi­ous year, while that in China was $12.6 bil­lion, ac­cord­ing to the or­ga­ni­za­tion.

Fis­cal deficits in most South­east Asian nations will nar­row through 2017, lead­ing to an im­prove­ment in pub­lic debt lev­els as a per­cent­age of gross do­mes­tic prod­uct, the OECD said. In­done­sia's growth will out­per­form its neigh­bors, with a 6.4 per­cent an­nual rate of ex­pan­sion from 2013 to 2017, the OECD es­ti­mated, equal to that recorded in the two decades be­fore the 1997 Asian fi­nan­cial cri­sis, the OECD said.

"This fa­vor­able out­look for In­done­sia re­flects the sig­nif­i­cant im­prove­ment in the coun­try's stand­ing with in­ter­na­tional in­vestors and the am­bi­tious in­fra­struc­ture in­vest­ment and eco­nomic re­forms spec­i­fied in In­done­sia's medium- term de­vel­op­ment plan," the OECD said.

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