Monday, January 21, 2013

Asean To Grow By 5.3% This Year

The economies of the Association of Southeast Asian Nations (Asean) including Malaysia is expected to expand slightly faster to 5.3% this year from 5.2% in 2012, said the Economist Intelligence Unit Ltd (EIU).
"As open economies, Asean members have been adversely affected by weak demand in the West and in China. But fundamentals are generally positive and Indonesia, by far the largest economy in the region, has proved resilient," it said in a report on Global Forecast for February 2013 released yesterday.
"We forecast another year of decent growth for Asean in 2013. The subregion will continue to do well in the rest of the forecast period, with annual growth averaging 5.8% between 2014 and 2017."
The EIU sees Asean, which is benefiting from China's emergence as an economic power, continuing to attract high levels of foreign investment.
However, it warned that like China, faced with subdued demand from Western markets, Asean economies will need to undergo a structural shift to lessen their dependence on exports and derive more growth from domestic demand.
"Indonesia, whose large economy makes it less dependent on external demand than other Asean members, is better placed to achieve such a shift than some of its neighbours. Sentiment towards Indonesia has dulled during 2012 as the current account has moved into deficit and the currency has weakened.
"But its fundamentals are solid and we expect Indonesia to achieve strong sustained growth over the medium term. By 2017 its economy, measured at market exchange rates, is forecast to be larger than that of South Korea," said the EIU.
The unit also expects inflation for Asean to rise to 4.4% this year, from 4% in 2012.
Globally, the EIU forecasts gross domestic product (GDP) to expand by 2.3% at market exchange rates in 2013 and by 3.3% at purchasing power parity (PPP) exchange rates, which give more weight to emerging markets.
"The global economy will remain weak, but some improvement is in prospect.
"The downturn in the euro zone will ease, with the 17-country bloc likely to return to very weak year-on-year growth in late 2013," it said.
It also believes that recent stimulus in China should feed through more visibly during the year, with Chinese growth accelerating to an annual average of about 8.5%— although it should be noted that this will be a peak for the current cycle and is unlikely to be matched again given the slowdown in China's trend growth rate.
US Congress's Jan 1 mini-deal on the "fiscal cliff" removed an immediate threat to US growth prospects, but how the world's biggest economy performs in 2013 will depend on the extent to which the next few months are marred by similar fiscal policy showdowns.
"The key downside risk to our forecasts will remain the possibility of further financial upheaval in the euro zone. But upside risks are arguably strengthening, in particular over the timing of the modest global recovery, which could gather pace sooner than we expect if confidence returns," said the EIU.


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