News Update
Pacific Economic Outlook 2005-2006 |
News Release
June 15, 2005
Pacific Economic Outlook 2005-2006
Regional Imbalances Threaten Robust Outlook
The Pacific Economic Cooperation Council (PECC) today released the Pacific Economic Outlook (PEO) 2005-2006 report, an annual forecast of 18 economies in the Asia Pacific region.
The PEO Forecasting Panel expects slower but still robust growth in the Asia Pacific region this year after the significant economic expansion in 2004.
- The weighted average real GDP growth for PECC economies in 2004 was 5.4%, up from 3.7% in 2003. In 2005, growth for the region will moderate to 4.2%.
- In East Asia, growth in 2005 will slow to 4.8% from last year’s 6.4%, which was the strongest since the 1997 financial crisis, while other PEO economies will slow to 3.4% from 4.1%.
- In 2006, real GDP growth is expected to remain about the same as in 2005 -- 4.3% for the whole region, 5% for East Asia and 3.3% for other PEO economies.
- Inflation will be muted throughout the region, notwithstanding higher energy and non-oil commodity prices. Oil prices are expected to average US$49.50 per barrel in 2005, up 19.3% from the 2004 average, before falling to an average of US$41 a barrel in 2006.
In his Overview, Yuen Pau Woo, Coordinator of the International Forecasting Panel and Chief Economist of the Asia Pacific Foundation of Canada, noted that the region’s strong performance in 2004 owes much to the traditional growth engines – United States and Japan – but that China has emerged as a new growth engine for the region. “In the course of the year, China overtook Japan as the second most important trading partner for many Asia Pacific economies and also overtook the United States as Japan’s most important trading partner,” stated Mr. Woo.
- The US economy was red-hot in 2004 but will cool to around 3.5% in 2005 and 3.3% in 2006, with only modest inflationary pressure.
- Japan has rebounded from a soft patch in the second half of 2004 but will experience slowing growth over the remainder of 2005 and 2006. At between 1.3% and 1.6% real GDP growth, the Japanese economy looks to be coming out of a decade-long slump, as well as an end to deflation.
- China will expand by 8.5% in 2005 and 8.2% in 2006, still driven very much by fixed asset investment, albeit to a lesser extent than in 2004. The risk of a hard landing has diminished, but cannot be ruled out altogether.
There are a number of risks to the outlook, stemming most notably from the trade and financial imbalances across the Pacific that will remain stubbornly high through the forecast period.
- A further widening of an already severe imbalance in trade and financial flows will continue to characterize the region, with the US current-account deficit expected to reach a record US$755 billion or 6.1% of GDP by year end. The PEO forecasts a fall in the trade-weighted US dollar of 6.1% in 2005 and 5.6% in 2006.
- A sudden loss of confidence in the US dollar could precipitate a disorderly decline in the value of the US currency, which could spill over into financial markets and the real economy.
- The current-account surplus in China will rise from 2.4% in 2004 to 3.1% in 2005 and 3.3% in 2006, fuelling calls for early revaluation of the yuan and fanning protectionist sentiment in industrialized countries.
- The evolution of Asia-only regionalism could have adverse consequences for trans-Pacific economic and political relations.
In his Foreword to the PEO, Dr. Kim Kihwan, International Chairman of PECC, underscored the report’s risk warnings, commenting that, “The region continues to be characterized by an acute imbalance in trade and financial flows and there is a serious risk of growing protectionism and disorderly adjustment of exchange rates.”
About the PEO
The PEO is the assessment of the economic outlook in the Asia Pacific by experts on each economy. Production of the PEO was coordinated by Yuen Pau Woo, Vice-President, Research and Chief Economist, Asia Pacific Foundation of Canada.
The full text of the PEO for 2005-2006 is freely available on the website www.asiapacificbusiness.ca/peo/
About PECC
The Pacific Economic Cooperation Council (PECC) is a tripartite, non-governmental organization devoted to promoting economic cooperation in the Pacific Rim. PECC brings together government officials, academics and business people to share perspectives and expertise in search of broad-based answers to regional economic problems. Founded in 1980, it is the only private observer body in the ministerial forum, APEC.
For further information about PECC please visit www.pecc.org
For further information, please contact:
Yuen Pau Woo
Vice-President, Research and Chief Economist
Asia Pacific Foundation of Canada
Phone: 604 641-1240
*****************************************************
WHY BECOME AN SEACBC MEMBER?
To succeed in today's businessworld, particularly in international trade, having an experienced well learned partner by your side is crucial. Strategic alliances make sense in modern business, and especially so in the ASEAN region. Southeast Asia Canada Business Council is here to provide you with the help you need.
Whether you have significant investment in the region or are just testing the market, your organization will derive value from its partnership with the Southeast Asia Canada Business Council.
The Council serves your organization as a hands-on source of support in the implementation of your corporate strategies and long-term objectives.
For information regarding seminars, trade missions, projects, dinners and other business networking events, please see our website at www.aseancanada.
or contact us at (604) 439 0779
Telephone: (604) 439 0779
Postal Address: 5294 Imperial Street
|
