According to a recent IMF report published in May of this year, growth for the Asia Pacific region is slated to continue to be a global leader. The IMF projects that average growth in the region will reach 5.5% for 2017 and 5.4% for 2018. This is due to the continuation of several strong trends across the region. Asian financial markets have also been resilient in the face of volatile capital flows. Robust demand spurring accelerating growth across Southeast Asia and continued the expansionary policy in Japan and China have proven to be strong drivers for the region. Stable but subdued growth in Korea is one of the few outliers, and India’s growth is expected to rebound in 2018 as the cash shortages of its currency exchange initiative wears off.
However, the region faces choppy waters ahead with significant uncertainty in its future outlook due to an aging population and slow productivity growth. Asia’s workforce is aging significantly faster than in the United States and other advanced economies. This means a large segment of the workforce is set to retire around the same time, leading to higher healthcare and pension costs which can strain government budgets. Demographic trends could subtract ½ to 1 percentage point from annual GDP growth over the next three decades in countries such as China and Japan. The region’s productivity growth is also another concern as it has been unable to reach the pace of more high technology economies.
Thus far the region has been able to lead global growth despite these concerns.
“The signs of growth in the region are encouraging so far. The policy challenge now is to strengthen and sustain this momentum,”
said Changyong Rhee, Director of the IMF’s Asia and Pacific Department