Resilience in Asia

Despite uncertainty over the future direction of global trade, the Asia-Pacific region has started recording some of its best export gains in recent years, according to statistics from the National Bureau of Statistics in China.

The total value of exports in the first quarter of 2017 was 3,326.8 billion yuan, up 14.8% year-on-year, reveals the Bureau, with exports to Russia, Pakistan, Poland, Kazakhstan and India increasing by 37%, 18.7%, 19%, 69.3% and 27.7% respectively in the first quarter. 

According to World Bank, the recent surge in export figures can be attributed to “buoyant” domestic demand across much of the region, “reflecting accommodative macroeconomic policies and tighter labour markets”.

Export values, it adds, have also started to increase, with commodity exporters benefiting from increased prices for oil, copper and other commodities following two years of anaemic growth.

Developing resilience

In its latest report for the region, East Asia & Pacific Economic Update: Sustaining Resilience, published in April 2017, the World Bank adds that growth in developing East Asia and Pacific (EAP) has continued to prove resilient, “as already robust domestic demand was supported by some pickup in external demand and a recovery in commodity prices”.

Among the smaller economies, it says, the recovery in commodity prices has provided opportunities for commodity exporters. However, it notes that in some of these countries, fiscal challenges constrained public spending, and natural resource sectors continued to be affected by difficulties, including resource depletion.

In Myanmar, for example, growth slowed to 6.5%, as flooding took a toll on agriculture, gas production declined, and domestic demand was affected by uncertainty regarding the new administration’s policies and by currency volatility.

Meanwhile, China and other large economies generally solidified their performance in the second half of 2016 and the start of 2017. In Vietnam, for instance, GDP growth picked up by more than 1% in the second half of 2016, to reach 6.7% year-on-year, says World Bank.

More, the contribution of net exports to growth in China turned negative in the first half of 2016 but has since been trading up. Exports also held up in the Philippines, Thailand and Malaysia.

China’s recovery of export volumes has, in turn, led to increased intermediate imports from the rest of the region, adds the World Bank. For commodity exporters in particular, it says, growth in export volumes bottomed out in the last part of 2016.

The World Bank continues that sustained expansion in the US, the EU and Japan has been accompanied by better-than-expected growth in the UK as well as in some emerging market commodity exporters. This recovery in activity has led to a pickup in global trade and a gradual increase in commodity prices, it concludes.

 Significant risks afoot

Whether the region’s recent surge in import and export figures is sustainable, however, remains unclear. Donald Trump’s protectionist talk, the UK’s decision to leave the EU, and rising geopolitical tensions surrounding North Korea and Syria mean that the positive prospects for growth in the region are subject to significant risks. 

Still, the World Bank’s growth outlook for the next three years remains broadly positive across the region. Growth in the region will continue to be driven by strong domestic demand, including public and, increasingly, private investment, with support from gradually strengthening external demand.

China is expected to continue its gradual transition to lower, more sustainable growth. In the rest of the region, the World Bank expects growth to continue to increase moderately. It says that the slow pace of recovery in commodity prices will benefit commodity exporters in the region, but notes that it won’t unduly hurt the economies of commodity importers in East Asia.