Thailand: Economic growth in the Asia-Pacific region should remain robust this year despite an expected slowdown in the US and continued appreciation of regional currencies, a UN report said Thursday.
The UN Economic and Social Commission for Asia and the Pacific, ESCAP, forecast growth of 38 developing economies in the region including China and India at 7.8% this year, slightly lower than 8.2% in 2007.
“Asia-Pacific economies are well prepared to manage continued uncertainty in the external environment over the coming months,” said Ravi Ratnayake, chief economist of ESCAP. “The region’s main strength lies in healthy macroeconomic fundamentals.”
Continued strong growth in China and high commodity prices are expected to generate export opportunities for economies in the region while healthy domestic demand is expected to support growth, the report said.
Despite the positive outlook, the report warns of risks from an unraveling of the U.S. sub-prime mortgage problem, a slowing US economy and global financial market instability.
A widespread decline in the value of housing assets in the US, a weakening dollar and tighter credit conditions could lead to slower consumer spending and imports by the world’s largest economy, the report said.
This would, in turn, dampen demand for exports from Asia’s developing countries, it said. Meanwhile, currency appreciation is expected to remain a serious challenge on the countries’ export competitiveness.
The countries which have seen the greatest exchange rate appreciation since 2006 Thailand and the Phillippines_ have already seen their export earnings suffering in recent months, the report said.
The impact has been most significant in low-technology intensive manufacturing sectors and sectors with low import content like garments, jewelry, furniture and agricultural products, according to the report.
Meanwhile, ESCAP expects China to face a moderate decrease in growth this year, owing to a slowdown in export markets and the continued efforts by the government to cool the economy. China’s economy is expected to grow at 10.1%, down from an estimated 11.4% in 2007.
India is forecast to sustain dynamic growth as the country remains largely insulated from weakness in the overly global economy, the report said. ESCAP forecast India’s economic growth at 8.2% this year, down from 8.5% in 2007.