Asia seen to continue leading global growth

MANILA, Philippines–Emerging markets like the Philippines are urged to focus on pursuing further reforms that address infrastructure gaps and ensure financial stability as preparation for continued instability in global economic conditions.

In its latest World Economic Outlook, the International Monetary Fund said the Asia-Pacific region would continue to lead the world’s growth this year, although China’s slowing expansion might spill over to other markets.

“Asia’s growth is forecast to hold steady in 2015, and the region is expected to continue outperforming the rest of the world over the medium term,” the IMF said in the WEO report released this week.

The multilateral lender said the region would benefit from lower world oil prices, strengthening external demand, and still-accommodative financial conditions despite some recent tightening.

The region’s economies, including the Philippines, still face risks despite the relatively rosy outlook. Elevated household and corporate debt amid higher real interest rates and a strong US dollar could amplify shocks, the IMF said.

“Policymakers should maintain prudent frameworks and build buffers to enhance resilience, and implement reforms to support demand rebalancing and relieve bottlenecks to growth,” the IMF said.

Growth decelerated last year to 5.6 percent, from 5.9 percent in 2013. While growth picked up across much of the region, slowdowns in several large economies, including China, Indonesia and Japan, provided a counterweight.

In 2015, the sharp fall in world commodity prices will support GDP growth across the region.

With the region being a net oil importer, the drop in oil prices will generate a windfall spur to purchasing power of about 1.7 percent of regional gross domestic product (GDP) in 2015, providing support to domestic spending and raising current accounts.

The Philippines is projected to grow by 6.7 percent this year, the IMF said earlier this month. This was slightly better than the IMF’s previous forecast of a growth of 6.6 percent.

As a whole, the Association of Southeast Asian Nations’ (Asean) five major emerging economies, namely Indonesia, Malaysia, the Philippines, Thailand and Vietnam will grow by 6 percent this year, IMF projections show.

The IMF said Asian emerging markets with large infrastructure gaps should consider giving public investment spending priority over easing monetary policy.

It added that strong regulation and supervision, protecting financial stability may also require proactive use of macroprudential policies to tame the effects of the financial cycle on asset prices, credit and aggregate demand.