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Monday, December 15, 2014

Outlook 2015: Which countries will grow fastest in Asia?

By Arno Maierbrugger

Improving fundamentals, successful reform programmes and, last but not least, lower oil prices will make emerging Asia once again the fastest growing region in the world in 2015, according to forecasts by international economic institutions such as World Bank, Asian Development Bank (ADB) and International Monetary Fund (IMF).

Studies show that the region will enjoy average GDP growth of nearly 7% in the coming year, which is by far stronger then the forecast for the entire Asian continent at 4.5%.

This is mainly driven by growth expectations for China, which – although slightly reduced to 7.2% from 7.4% – are still crucial for the region’s entire economy.

Besides that, Southeast Asia is seen as a particular bright spot in terms of stronger economic development due to various other factors. Indonesia, the largest economy in Southeast Asia, has introduced widespread economic reforms and generally sees robust private consumption.

Malaysia has caught up due to improving exports and a strong labour market, and Thailand is expected to overcome its politically induced economic slowdown in 2015 due to higher government spending in infrastructure and attempts to create room for productivity-enhancing investments.

The winner in Southeast Asia, however, seems to be the Philippines. The formerly “sick man of Asia” has obviously recovered well under the presidency of Benigno Aquino III and is expected to be among the fastest growing countries in the region.

The Philippines posted 5.3% GDP growth in the third quarter of 2014, behind Malaysia’s 5.6% and Vietnam’s 6.2%, but is expected to post 6.7% GDP growth in the coming year. This is due to the country’s improved economic fundamentals, increased inflow of foreign direct investments and buoyant remittance activity from Oversea Filipino Workers which pushes up private consumption.

Rating agency Moody’s last week raised the Philippines’ credit rating a second time in 14 months to Baa2 with a stable outlook from Baa3, citing the country’s “ongoing debt reduction and improvements in fiscal management, favourable prospects for strong economic growth and limited vulnerability to the common risks currently affecting emerging markets.”

The growth outlook for Myanmar has been originally slightly higher than the forecast for the Philippines as per ADB figures, but economists believe that the country’s growth will slow down due to its increasing trouble to contain inflation and the devaluation of its currency.

However, institutional and policy reforms, along with continued strong foreign investments, are expected to keep Myanmar on track.

Growth in the 5 to 6% range is expected for Vietnam, while GDP expansion in Cambodia and Laos should be around 7%, albeit from a significantly lower level.

Singapore and Brunei will be the slowest growing countries in the region.

Singapore’s growth forecast for 2015 has just been cut by the city state’s largest bank DBS to 3.2% from 3.6%, citing continued exposure to divergence in global monetary policies. Lower oil prices, however, should benefit the manufacturing sector in the country, DBS said.

The latter is not the case for oil-rich Brunei. The 2015 GDP growth forecast for the tiny sultanate is a meagre 1.2%.

In comparison, growth expectations for the Middle East remain subdued. Growth in the Gulf Cooperation Council countries is projected by the IMF to average about 4.5% annually in 2015, with non-oil GDP expanding 6% and oil GDP rising just 0.5%, if at all, i.e. unless oil price are remaining that weak or are falling further.

Sumber - Gulf Times

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