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Asian Economy: Overview, Growth & Development

Southeast Asia; a short review

Data to the end of June 2019 show growth in Southeast Asia remaining robust, though slower than forecast. The subregion’s more open economies faced the combined impacts of the trade conflict and a trough in the electronics cycle, which were partly offset by strong domestic demand. Meanwhile, evidence of trade and production redirection is appearing, with some countries seeing increases in foreign direct investment and exports. Viet Nam, for example, expanded its exports by 6.7percent in the first 5 months of 2019, buoyed by a 28percent rise in exports to the US, and its already sizeable inflows of direct investment increased by 27percent. Other economies also saw growth in exports to the US pick up, which helped to offset weaker growth in exports to the PRC.

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Moody’s cuts India’s growth forecast to 5.8 pc for fy20

International rating agency Moody’s on Thursday announced the lowering of India’s Gross Domestic Products (GDP) growth to 5.8 percent. This is lowest projection after the Reserve Bank of India cut the GDP growth to 6.1 percent earlier this month. “We forecast real GDP growth to decline to 5.8 percent, in the fiscal year ending in March 2020, from 6.8 percent in fiscal 2018, and to pick up to 6.6 percent in fiscal 2020, and around 7.0 percent over the medium term,” the agency said. It said that India’s growth will remain weaker than in the recent past at 5 percent year-on-year in the April-June quarter of 2019. India’s real GDP growth has slowed markedly. The drivers of the deceleration are multiple, mainly domestic factors and in part, long-lasting. What was an investment-led slowdown has broadened into consumption, driven by financial stress among rural households and weak job creation. A credit crunch among Non-Bank Financial Institutions (NBFIs) — who have been major providers of retail loans in recent years — has compounded the problem. Compared with only two years ago, the probability of sustained real GDP growth at or above 8 percent has significantly diminished. While Moody’s expects a moderate pickup in real GDP growth and inflation over the next two years through monetary and fiscal stimulus, it has revised down the nation’s projections for both years.

Malaysia to boost economy in 2020 as Sino-U.S. trade war drags on

Malaysia’s government will likely present an expanded budget on Friday to temper a weak economic outlook, as it grapples with global recession fears, the protracted U.S.-China trade war and a large debt pile left behind by its predecessors. Southeast Asia’s third-largest economy bucked a global cooling trend and grew faster than expected over the first half of 2019, but analysts say growing protectionist policies around the world will eventually drag on the trade-reliant country. Prime Minister Mahathir Mohamad’s government will at the least need to sustain its development spending to prop up domestic demand next year, economists have said, even as it continues to deal with 1 trillion ringgit ($238.66 billion) in debt that has been blamed on embattled former premier Najib Razak’s administration. “We think Budget 2020 will likely include a contingency plan to counter the effects of a slowdown from the US-China trade war – a “so-called” mini fiscal stimulus package,” RHB Investment Bank said in a note. The contingency fund, which the bank estimated could amount to 3 billion ringgit ($715 million), will be on top of an estimated 55 billion ringgit that the government will likely set aside for its 2020 development budget, RHB said. Mahathir’s government bucked expectations when it tabled an expanded budget in November, in a bid to boost revenue despite the slowing economy. It also set a higher fiscal deficit target over the next few years to make room for domestic spending while chipping away at its debt.

 

Bangladesh slips in global competitiveness ranking

Bangladesh’s competitiveness is eroding owing to weakening macroeconomic stability, deterioration of labour market conditions, lack of ICT adoption and inadequate progress in infrastructure, according to the World Economic Forum’s Global Competitiveness Index (GCI) 2019. The country’s position slipped two notches to 105th in this year, according to the GCI, which was unveiled yesterday by the Centre for Policy Dialogue (CPD), a partner of the WEF. The index maps the competitiveness landscape of 141 economies through 103 indicators organised into 12 themes. Each indicator, using a scale from 0 to 100, shows how close an economy is to the ideal state or “frontier” of competitiveness, with 100 representing an optimal situation. The pillars, which cover broad socio-economic elements, are: institutions, infrastructure, ICT adoption, macroeconomic stability, health, skills, product market, labour market, the financial system, market size, business dynamism and innovation capability.

Closer China-Nepal ties don’t lock out other nations

The Indo-Pacific strategy proposed by the US is not suitable to Nepal. In anticipation of Chinese President Xi Jinping’s upcoming visit to Nepal, The Diplomat magazine published an article saying Kathmandu is caught between the China-proposed Belt and Road Initiative (BRI) and the US Indo-Pacific strategy. But that viewpoint may overestimate Washington’s economic clout in the Himalayan nation. Although US President Donald Trump is strongly upholding the Indo-Pacific concept, his political rhetoric hasn’t brought much investor interest or capital to Nepal. The Indo-Pacific strategy is still no more than a concept that lacks operating details. The US was one of the first countries to extend development assistance to Nepal, but the total US foreign assistance to the Himalayan nation was just $115 million for fiscal year 2017.

China urges US to halt pressure on Chinese firms

China has urged the United States to stop unreasonable pressure on Chinese companies, including Huawei Technologies, Foreign Ministry spokesman Geng Shuang said at a daily press briefing on Thursday (Oct 10). The United States will soon allow some US companies to sell non-sensitive goods to the company, which had been on a US trade blacklist since May, it is reported.

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