Although the global economy is predicted to show continued overall weakness, East and South Asia have relatively more favorable forecasts for 2016 and 2017, a new United Nations report says.
According to the “UN World Economic Situation and Prospects: Update as of Mid-2016,” there are little prospects for a global turnaround in 2016, as the world economy is projected to remain weak.
World gross product is seen to grow by just 2.4% in 2016, the same pace as in 2015. Prospects for 2017 also remain well below pre-crisis trends at 2.8%, and a protracted period of slow productivity growth and feeble investment weigh on the longer-term potential of the global economy, said the UN.
The report produced by the UN Department of Economic and Social Affairs (DESA) found that persistent weakness in aggregate demand in developed economies remains a drag on global growth, while low commodity prices, mounting fiscal and current account imbalances, and policy tightening have further dampened prospects for many commodity-exporting economies. This has been compounded by severe weather-related shocks, political challenges, and large capital outflows in many developing regions.
DESA also warns that downside risks to the global economy remain elevated. Large developing economies remain prone to capital flow volatility and exchange rate pressures, while a further deterioration of commodity prices could exacerbate debt-service burdens of certain commodity-dependent economies.
“The report underscores the need for a more balanced policy mix to rejuvenate global growth and create an enabling environment to achieve the 2030 Agenda for Sustainable Development,” said Lenni Montiel, UN assistant secretary-general for economic development.
In East Asia, however, the region’s developing economies are expected to see only a modest deceleration in growth this year, with the slowdown in China partly offset by acceleration in the rest of the region.
For the region, GDP growth is projected to average 5.5% in 2016 and 5.6% in 2017. Domestic demand—particularly private consumption—will remain the engine of growth for most countries.
Despite the stabilization or depreciation of most of the region’s major currencies since early or mid-2015, exports continued to decline in early 2016, particularly in intra-regional trade.
Investment remains generally weak, although Malaysia and Vietnam, which are expected to reap significant benefits from the Trans-Pacific Partnership, are projected to step up investment in preparation for the trade agreement.
The establishment of the ASEAN Economic Community at the end of 2015 and the introduction of other regional economic integration measures could also entice additional private investment.
China is projected to grow by 6.4% in 2016 and 6.5% in 2017, in line with the government target.
For South Asia, despite the protracted instabilities and general weakness of the global economy, the regional economic outlook remains favorable, with most countries benefiting from low oil prices.
Regional GDP growth is expected to accelerate from 6.1% in 2015 to 6.6% and 6.8% in 2016 and 2017, respectively, owing to robust private consumption, strengthening investment demand and gradual progress on domestic policy reforms.
The regional prospects are contingent on robust growth in India and the recovery of Iran. India’s economy is slowly gaining momentum, with an expected GDP growth of 7.3% and 7.5% in 2016 and 2017, respectively.
In other parts of Asia, Western Asia’s economic outlook continues to be driven by oil market developments, ongoing conflicts, and geopolitical concerns. Regional GDP growth is expected to weaken further from 2.8% in 2015 to 2.4% in 2016, as lower oil prices require significant macroeconomic adjustments and investment demand remains subdued.
The slowdown is more pronounced in the countries of the Cooperation Council for the Arab States of the Gulf (GCC), with domestic demand decelerating and external and fiscal accounts weakening in most economies.
On the positive side, global energy-related carbon emissions remained flat in 2015, suggesting a potential delinking of economic growth and carbon emissions growth. In addition, investments in renewable energy sources reached a new record in 2015, mainly due to increased commitments and policy support in many developing countries, DESA said.
Photo: Manuellebron
