Asia no longer seen as engine of global growth

PUBLISHED : Saturday, 25 January, 2014, 5:11am
UPDATED : Saturday, 25 January, 2014, 5:17am


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Emerging Asian economies will contribute less to global growth this year than earlier expected, even as their major trading partners in the West show signs of recovery, a Reuters poll showed yesterday.

From China to India, Indonesia, Taiwan and Thailand, more than 225 economists polled between January 16 and Thursday have collectively downgraded or left unchanged growth estimates for nine of the top 13 economies in Asia outside of Japan.

At a time when developed economies are expected to beat last year's growth rates, the results imply that Asia, the recent engine of world growth, may see its contribution diminish.

"The days of double-digit growth are behind us, at least in the largest emerging economies," said BNP Paribas economist Dominic Bryant.

"China is slowing down as a result of repositioning itself to a domestic-demand driven economy. And since it makes up 50 per cent of Asia, there are bound to be some knock-on effects around the region."

After stunning the world by clocking over 10 per cent growth on average for the last three decades, China started last year to wean itself off credit and investments and changed track to increase domestic consumption.

As a result, its growth rate has steadily dipped. Data this month showed the economy grew 7.7 per cent in the last quarter of 2013.

Economists predict a 7.4 per cent average growth rate this year, which would be the slowest expansion since 1990, and a further cooling to 7.2 per cent next year.

Fears of a sharper slowdown in China topped investors' concerns of prospective risks for this year, according to a survey of fund managers released by Bank of America Merrill Lynch.

Policymakers in Beijing, though, are unperturbed and say the modest slowdown was expected and will likely continue.

But the change has affected countries that fuel China's appetite for commodities. Australia has steadily seen its raw-materials-related exports fall, in turn denting the economy.

India, too, another regional powerhouse, is expected to grow at a lacklustre pace of 5.4 per cent in fiscal year 2014-2015, the result of a weak investment cycle gripping the country.

Elsewhere in Asia, the economy is expected to be tepid in this year, with elections due in Indonesia, ongoing protests in Thailand, currency strength in South Korea and rising bond yields in developed countries pushing investors out of the region.

In the poll, forecasters stuck to their predictions of high inflation in the region, unlike in the West where some of the largest economies are experiencing rapidly slowing price rises.

Infrastructure bottlenecks are seen by analysts as the key reason Asia is unable to benefit from weak food prices globally.