WWD.com/business-news/government-trade/uptick-in-growth-seen-for-asia-pacific-nations-6898590/
government-trade
government-trade

Uptick in Growth Seen for Asia-Pacific Nations

China's economy projected to grow 8 percent this year.

GENEVA — Growth in Asia-Pacific developing economies is forecast to increase to 6 percent in 2013, slightly up from 5.6 percent last year, with steady demand growth in the U.S. and a mild rebound in the performance of major emerging economies spurring the expansion, a United Nations report said Wednesday.

The region’s biggest emerging country, China, is expected to grow 8 percent, up from 7.8 percent in 2012, and India to expand 6.4 percent, up from 5 percent, the study by the Bangkok-based U.N. Economic & Social Commission for Asia and the Pacific said.

The report concludes that the persisting economic uncertainty in rich countries, particularly in recession-hit European nations, is “testing the resilience” of developing economies in Asia-Pacific. The survey estimates the downturn in rich economies between 2008 and 2012 reduced Asia-Pacific gross domestic product by 3 percent, equivalent to an output loss of $870 billion.

The commission’s “Economic and Social Survey of Asia and the Pacific 2013” also suggests that it’s time for many countries in the region to reorient their economic policies “to address structural impediments to growth.” Energy and infrastructure gaps are among the structural problems that need to be addressed, noted Noeleen Heyzer, ESCAP executive secretary.

The study outlines that investment climate assessment survey of firms in South Asia shows that “the lack of infrastructure is a major obstacle to business expansion, ranging from approximately 33 percent in India to about 80 percent in Bangladesh.”

“Power is the most critical bottleneck, with transportation a close second,” it said.

Electricity outages are a major recurrent problem for many apparel exporting companies based in the region, especially during peak production periods. In Bangladesh, only 41 percent of the population has access to the electricity network, while in Pakistan just 62 percent are on the grid, and in Sri Lanka about 77 percent, compared with 99 percent in China, notes the report.

 

The structural problems, along with high oil and food costs and currency depreciations, are cited as contributing factors to the persistence of high inflation in India, Bangladesh, Pakistan and Sri Lanka. In India, inflation last year reached 10 percent and is expected to decline to 7 percent in 2013, while in Bangladesh inflation rose to 10.6 percent and is anticipated to decline this year to 7.5 percent, ESCAP said. Inflation is also expected to edge slightly downward in Sri Lanka to 7.3 percent from 7.6 percent in 2012; to drop to 8.5 percent from 11 percent in Pakistan, and to decline to 8 percent from 12 percent in Vietnam.

High inflation rates erode the purchasing power of wages and set in motion demands for increases in payment rates, which can result in protracted industrial action if demands are not met, as witnessed by strikes organized by apparel labor unions in Bangladesh, Vietnam and Cambodia, noted the report.

ESCAP projects some textile and apparel exporting nations will post strong economic growth rates. Sri Lanka is expected to grow 6.5 percent, Bangladesh by 6 percent, Cambodia by 7 percent, Laos by 8.1 percent, Vietnam by 5.5 percent, Turkey by 3.8 percent and Pakistan by 3.5 percent.

Cambodia’s output growth is expected to remain high “on the back of a recovery in garment exports,” but the economy “faces the challenge of diversifying and moving up the value chain from low-wage garment production,” said the study. In Bangladesh, U.N. economists said the higher government growth target of 7.2 percent will be difficult to attain “given critical infrastructure shortage, global economic uncertainties and likely political instability in an election year.”