Growth in Asia and the Pacific will continue to outperform the rest of the world, and IMF says it will remain steady at 5.6 percent in 2015, easing slightly to 5.5 percent in 2016.
In its Regional Economic Outlook for Asia and the Pacific, IMF said Asia’s growth will be driven by domestic demand, underpinned by healthy labor markets, low interest rates, and the recent fall in oil prices.
The global recovery, while moderate and uneven, will continue to support Asia’s exports, say the report’s authors. Performance across the region is expected to be mixed, said the survey report (see table).
China’s economy is slowing to a more sustainable pace—6.8 percent GDP growth in 2015, and 6.3 percent in 2016, while growth in Japan is picking up to 1.0 percent this year, and 1.2 percent next year.
India’s growth rate is expected to rise to 7.5 percent this year and next, making it one of the fastest growing economies in the world.
Within the Association of Southeast Asian Nations (ASEAN), while Malaysia is expected to slow, the Philippines should see growth increase. Overall, lower commodity prices are a net positive for Asia, although several commodity exporters (Australia, Indonesia, Malaysia, and New Zealand) will be adversely impacted.
Asia will remain the global growth leader, even though potential growth—the economy’s speed limit—is likely to slow (Chart 1). While Asia accounts for nearly 40 percent of global output, it contributes nearly two-thirds of global growth. Asia’s leading role in world growth is set to continue over the medium term despite slowing potential growth, which reflects weaker productivity gains, the effects of aging, and infrastructure bottlenecks.
However, the outlook could be vulnerable to adverse events, says the report. This reflects the potential for slower-than-currently-expected growth in China and Japan, which could spill over to the rest of the region—and the global economy—through trade and financial channels.
The report’s authors observed that lower oil prices have provided an opportunity to undertake further fiscal reforms aimed at lowering energy subsidies, and measures have been taken in a number of countries, including Malaysia, India, and Indonesia.