By Catherine N. Pillas & Mary Grace Padin
ASIA Pacific’s growth next year would be driven largely by robust consumer spending and steady government spending, an official of the Asia-Pacific Economic Cooperation (Apec) Public Support Unit (PSU) said on Monday.
Apec Secretariat Director for Policy Support Dennis Hew said in a media briefing that the region’s local output, as measured by GDP, would grow by 3.4 percent in 2016 from the projected 3.1 percent this year.
“GDP growth and trade volume in the region are expected to be moderate in 2015 and will recover in 2016,” Hew said.
For this year, Hew said GDP growth in Asia Pacific would settle at 3.1 percent, lower than the 3.4 percent recorded in 2014. He also said the volume of exports this year is expected to grow by 2.3 percent, slower than the 4.4-percent hike posted in 2014.
In May a report published by the Apec PSU indicated that domestic factors, such as robust household spending and steady government consumption, and investment would boost GDP growth in most Apec economies next year.
Aside from faster GDP growth, Hew said the Apec region would also be able to increase the volume of 2016 exports and imports by 3.3 percent and 4.2 percent, respectively.
GDP growth and trade, PSU said, would be propelled largely by the sharp recovery of the US.
PSU said oil prices, the timing of the US monetary policy normalization and China’s slowdown are “uncertainties” that could impact on Asia-Pacific countries. In the April-to- June period alone, PSU said the Asia-Pacific region’s GDP grew by 3.1 percent, slightly lower than the 3.1 percent recorded in the previous quarter.
Hew said private consumption continued to be the main driver of growth across the region while trade in the region contracted in the second quarter.
“Household spending remained the major driver of growth in the Apec region, while government spending and gross fixed capital contribution also contributed, even as exports contracted,” Hew said.
“The PSU [report] suggests that GDP growth’s responsiveness to private consumption has increased markedly after the 2008 financial crisis, as opposed to the weakening trade-GDP relationship,” he added. To spur growth, non-governmental organization (NGO) Pacific Economic Cooperation Council (PECC) urged Apec countries to implement structural reforms in education, labor and infrastructure.
PECC, an observer-institution to the Apec Summit, presented the results of its annual Asia Pacific State of the Region survey. The survey is an annual statement of PECC’s views on the major developments affecting Asia-Pacific regional cooperation.
It gathered 710 responses from opinion leaders in Asia Pacific, majority of which represented the views of NGOs.
According to PECC’s survey, the region is expected to grow by 3.2 percent this year—the slowest since 2009, right before the global financial crisis.
“The average growth for the region has really slowed down from 5-percent growth to around 3.5 percent. This year, we see the slowest regional growth for the Asia-Pacific region since the bounce of 2010 from the global financial crisis so there urgent need to rethink growth strategies,” PECC Secretary-General Eduardo Pedrosa said.
“We need to consider of where the future growth will come from,” Pedrosa said. Future growth sources identified were regional integration trade initiatives such as the Transpacific Partnership Agreement, the Regional Cooperation Economic Partnership and the Free Trade Area of the Asia Pacific.
However, more than the growth sources, PECC officials said the failure to implement structural reforms is the second most pressing concern of respondents of the survey. Almost 60 percent of respondents cited the difficulty of anchoring solid structural reforms as an important risk to growth, significantly higher than last year’s survey.
The survey also revealed that 61 percent of respondents from the Southeast-Asian region regard inefficient enactment of structural reforms as a challenge to growth.
Image credits: Stephanie Tumampos