THE PROSPECT OF EAST ASIA HORIZON

The World Bank projected Indonesia’s economic growth in 2014 at 5.3%, lower than 2013 at 5.8%. Vice President of the World Bank for East Asia and the Pacific region Axel van Trotsenburg said that Asia Pacific countries line Indonesia and Thailand would face difficult time and high debt this year.

In their entitled: Asian Development outlook, latest edition, ADB projected Developing Asia consisting of 45 countries expect Japan to grow by 6.2% in 2014. This figure was an increase against previous projection of 6.1%. Next year, GDP was predicted to grow by 6.4%. Economic slowdown in China due to change in economic model would be filled with demand from advanced countries in line with economic recovery there.

According to Trotsenburg, economic growth of the Philippines would also slowdown by 6.6% - while in developing countries in East Asia growth would be predicted at 7.1%. Somehow East Asia would be a region of highest growth in the world in spite of slowdown by 8% on the average in 2009 to 2013.

In China, growth was slightly down to 7.6% against 7.7% in 2013. Other developing countries in East Asia would grow at 5.2%, down against 5.2% the previous year. Global growth which strengthened this year could help to stabilized while adjusting to tight global financial condition.

The World Bank also predicted developing countries in East Asia and the Pacific region would post steady economic growth. This region had been the world’s economic propeller force since the global financial crisis began. The growth was supported by world’s economic recovery and market response to Tappering Off run by the Fed in the USA.

In general the World Bank estimated economic growth in the East Asia region would stabilize in 2014. One of the causes was Tappering Off run by the Fed which was responded negatively by the market. The World Bank estimated economy in the East Asia region would grow by 7.1%, not too far different from last year.

The only thing was that Southeast Asia would be facing problems like global financial liquidity and overseas debt, but most of the islands in Eat Asia like Timor Lester would be dependent on help from developed countries.

As with Indonesia, the World Bank estimated economic growth in 2014 would be 5.3% against 5.8% in 2013. The World Bank believed that the General Election would have no notable impact on economic growth.

Malaysia's economy was predicted to grow by 4.9% in 2014. Malaysia predicted increased export, but expenses for debt payment and fiscal consolidation underway would be burdened on domestic demand.

In Cambodia, the post election condition would help to stabilize economic growth at 7.2% this year and Myanmar would grow by 7.8%; Vietnam would grow by 5.5%.

The World Bank saw growing prospect of Asia. Most of the economy in the region had strengthened their fundamental. Besides, although the Fed was starting to reduce their stimuli, tightening of global liquidity was still mitigated by accommodative policy in Europe and Japan. In spite of capital outflow this mid-year, Asia was still able to sustain growth level.

But ADB still saw three potential risk. Firstly, if China's effort to ease credit growth turn out to hold back growth significantly, it could bring impact on the prospect of trading counterparts. Secondly, so far economic data of developed countries were still varied and demand for Asian products could not be too promising. Thirdly, if it turned out that the US monetary policy caused global financial turbulence.

The World Bank's prediction was just the same, so ADB also predicted China's GDP would descend to 7.5% in 2014 an 7.4% in 2015 against 7.7% in 2013 ; while GDP of developed countries, i.e.: the USA, Uni Europe and Japan would grow by 2.2% this year, an increase of 1.9% against previous estimate.

Growth in Southeast Asia was predictably stable at 5.0% this year and to increase by 5.4% next year. Unfortunately ADB lowered Indonesia's growth projection this year from 5.8% to 5.7%. But next year, GDP was predicted to be 6.0%

Economic growth of Asian countries would be higher in the next 2 years. However the growth could be held back by China’s effort to slowdown their economic growth. Like the World Bank’s analysis, ADB also saw that adjustment of China’s economic target might affect growth of developed countries like the USA, Europe and Japan.

ADB projected GDP of developing countries in Asia would grow by 6.2% this year and move up further to 6.4% in 2015. Last year this region posted growth of 6.1%. The Asia region encompassed 45 developing countries

East Asia’s statistical curve line would turn flat following China’s moderate growth. This was related to effort of China's authorities to control credit growth. Outlook of regional growth would depend on economic recovery in the industrial states and China’s effort to control their internal credit. ADB projected China’s growth descended to 7.5% this year and continued to move downward to 7.4% in 2015, against 7.7% the previous year.

The Government of China kep changing their priorities toward growth quality. This would probably slow down China’s growth in the short run, but would keep more sustainable growth in the long run. ADB economist informed that China's effort to balance their economy had been fruitful. The service sector in China had been fruitful. Service sector in China turned stronger last year compared to the industrial sector, now constituting the biggest portion against GDP. This was the attainment in the process of balancing economy.

However, China’s economy was for the most part propelled by investment growth by the time domestic consumption was strengthening. China's leaders wished to change their economic growth model not to be dependent on [portofilio] investment which was often fruitless. The wished to rely more on domestic demand as economic propeller for a sustainable future.

ADB also projected the South Asia region grow by 5.3% this year in line with continuing reformation in India. ADB also warned that Tappering Off by the Fed might trigger turbulence in the moneymarket although the risk was controllable. Developing countries of Asia were now in a better position to face such shocks. Many countries in the region were posting surplus and stronger banking system.

With reference to the projection by the two international bodies, the Government of RI and businessplayers could adopt anticipative strategy especially in the effort to attract foreign investors, to promote export and restrict import of capital goods and semi-finished products; this was to minimize deficit in current transaction and to control inflation.

To Indonesia, now it was more important to maintain economic and monetary stability instead of enhancing economic growth which had its effect on swelling deficit ratio and soaring inflation which in the end would depreciate Rupiah value against USD. (SS)

Business New - April 25, 2014