TO KEEP WATCH ON ECONOMIC OVERHEATING IN ASIA

          On a quiet and peaceful day, all of a sudden the International Monetary Fund (IMF) made a shocking announcement of a potential overheating of economy in the Asia states were asked to neutralize their macro economy policy to anticipate any possible overheating.

            IMF stated that on the short term there were anxiety of overheating pressures bursting out in Asia. IMF saw that in some countries there were some strains of downturning inflation although in some countries inflation was partially descending as indicated by prices of commodities moderately moving.

            Specifically IMF saw signs of core inflation which was still high in some countries, even indlation projection in many countries had exceeded mid-year target which was set by the respective countries.

            Such was on account of macro economy polices which was accommodative where bank interest rate in some Asian countries were surprisingly below that of pre-crisis era in 2002-2007. For that matter countries of the Asian region must adopt more neutralized macro economic policy.

            Governments of Asian states must set eyes on domestic demand and rely less on export to jack up on that Asian states must take the great challenge of changing the model of economic character.

            The change in growth characteristics would help to step up public participation and minimize inequality which had been prominent in the past decade. Meanwhile it would be necessary to keep watch on the risk of bubble economy in property business in Asia, especially China and Singapore which had somehow cooled down by Government’s intervention who actively strived to ease property prices time after time.

            To take a closer look at China, property prices were reduced and transactions lessened. The risk of bubble in property prices in China had been significantly under control. As known, China had taken some administrative measures to make sure that the bubbles were not dangerous.

            In fact to quote the official statements of the authorities in China and India, who lowered their projection of economic growth to 7.5% and 6.8% respectively, IMF statement was irrelevant and was even controversial.

            Moreover the Asia development Bank (ADB) also reported that economic recovery in Europe which was full of uncertainty could have its effect on global economy. Asia was no exception, including Indonesia.

            ADB report under the title of “Asian Development Outlook 2012” showed the average economic growth in Asia would still increase and even to soar up by 2013. The propeller was strong domestic consumption. In that case IMF estimate was not applicable this year, perhaps next year.

            ADB saw that continuous uncertainty in Europe and slowdown of global trading had posed as the biggest threat to the future growth of Asia. ADB estimated that economic growth as indicated by GDP in Asia would come to 6.9% - the figure was predicted to kove up again to 78.3% in 2013.

            ADB report mentioned four regions in Asia and East Asia would lead economic growth in 2012. The growth projection was 7.4% which was a downturn against the 8.1% in 2011.

            In spite of highest growth rate, the economic growth rate in this region was declining due to slowing down export. China would still be the locomotive of growth in the East Asia region. The economic growth in this bamboo curtain country tend to be moderate, growing from 7.5% in 2012 to become 8.5% in 2013. But this growth projection was posted at 9.2%.

            In the second position was South Asia which would score growth of 6.6% in 2012. Economic growth in that region was influenced by Issued demand and fiscal limitations. India would lead economic growth in this region with growth rate of around 6.8% - 7.0%.

            Meanwhile Central Asia was predicted to undergo change in economic activities through 2012. ADB estimated economic growth in this region to be merely 6.1% due to economic recovery in Europe and lessened economic growth in Russia.

            In the Southeast Asia region, economic growth was projected at merely around 5.7% in 2012 against 4.6% in the previous year. Although considerably lower compared to other Asian countries, Southeast Asian states were fortunate to undergo economic growth compared to previous year.

            How was Indonesia’s position? Amidst high economic growth in Asia and global uncertainty, according to ADB, Indonesia was in a safe position whereby to strongly grow. ADB predicted Indonesia’s economy would grow by 6.4% in 2012 amidst lowered external demand. However, the situation would revitalize itself in 2013 in line recovered trading and betterment of investment climate.

            Generally speaking Indonesia’s economy would be in the process of sustainable growth for the long run moreover the Indonesian Government had their commitment to increase public investment in infra structure.

            In addition to the above the Government of RI would also minimize obstacles to development such as weakness in budget utilization and to lessen imbalance of development between the western part and eastern part of Indonesia.

            Global economic weakening would force the Government to speed up infra-structure development to jack up economic growth for the short run. Besides, the Government planned to step up economic potential for the mid term. Insufficient development of infrastructure especially in energy and transportation sectors would be a hindrance to economic growth.

            Generally speaking economic estimated Indonesia’s economy which referred to GDP would grow moderately at 6.3% - 6.5% this year. This prediction was relatively the same o lower than growth realization in 2011 at 6.5%. Sector wise, the manufacturing sector was estimated to be the propeller of economy growth.

            The international property consultant Knight Frank even stated that in 2050 Indonesia would be in the fourth position in the world in terms of GDP. By that time Indonesia’s GDP would reach USD 13.93 trillion.

            Compared to developing countries in Asia, Indonesia’s GDP percentage was predicted to increase from 27% in 2010 to 49% in 2050. The supporting factors to GDP growth were among others Indonesia as producer of products from rich natural resources.

            Furthermore Indonesia would be in the 8^th position in the word in terms of economic growth, i.e. 68% in 2050. The top five position in the world were occupied by Nigeria (8.5%), India (8%), Iraq (7.7%), Bangla Desh (7.5%) and Vietnam (7.5%).

            From the above picture it was apparent that IMF projection about economic overheating was mere exaggeration. Moreover inflation in Asia was under control by some fiscal and monetary policies which were effective to ease inflation pressures.  

Business News - May 11, 2012