May 14 – The United Nations Economic and Social Survey of Asia and the Pacific (ESCAP) launched the 2012 edition of the Economic and Social Survey of Asia and the Pacific on May 10, the oldest and most comprehensive annual review of economic and social development in the region. The survey scales down the economic growth of the region to 6.5 percent in 2012, with China and India expanding their economy by 8.6 percent and 7.5 percent, respectively.
Similar to the statement made in the Asia-Pacific Regional Outlook by the IMF, ESCAP sees Asia as the world’s fastest growing region and an anchor for global economic stability. According to ESCAP, the growth rate of the region’s developing economies is projected to slow down to 6.5 percent in 2012 compared to 7 percent in 2011 and 8.9 percent in 2010. However, the slowdown is expected to lower the inflation rate in the region from 6.1 percent in 2011 to 4.8 percent in 2012.
Besides the challenges of the external environment, the survey highlights the major internal challenge of high commodity prices facing Asian countries. In order to combat the global turbulence and high commodity prices, ESCAP lays out several policy suggestions, including managing the balance between growth and inflation, coping with capital flows and dealing with considerable exchange rate volatility, and addressing jobless growth and unemployment.
ESCAP Country Details: China
Similar to all other major economic forecasts, ESCAP scales down China’s GDP growth to 8.6 percent in 2012 from a 9.2 percent growth in 2011 as a result of the sluggish economic performances of the European Union and the United States, as well as the Chinese government’s intention to focus on the quality of growth instead of quantity.
The major challenge for policymakers is the persistently high inflation rate, which is tied closely with the economic conditions in the developed world and has a great impact on domestic stability. The increase of consumer prices is forecast to be slower in 2012 at a rate of 4 percent compared to 5.4 percent in 2011.
According to ESCAP, the RMB will continue to appreciate in 2012 as the central bank keeps easing its monetary policies. In the meantime, capital outflows from China to other countries will continue to accelerate in 2012.
ESCAP Country Details: India
Contrary to the IMF’s forecast, ESCAP projects faster economic growth for India in 2012 as compared to 2011. India’s GDP is expected to grow at a rate of 7.5 percent, up from 6.9 percent in the previous year, due to high savings and investment rates together with a rapidly expanding labor force and middle class.
Though the growth outlook projected by ESCAP looks promising, challenges remain. First of all, persistence inflation continues to be the major policy concern of the Indian government. Although the government’s tightening of its monetary policy has had a positive effect on the stubborn inflation, loosening monetary policies are needed to support growth. There are signs of such easing in India, for example, the lowered basis point of case reserve ratio at scheduled banks in 2012.
Other big challenges facing the Indian government are the rising budget and account deficit which require rebalancing. Moreover, severe energy shortage and widespread poverty continue to be major long-term development challenges.
The full report and country details of other countries in Asia-Pacific Region can be accessed by clicking here.