BANGKOK (United Nations Information Services) – Management of exchange rates is the biggest challenge facing Asia-Pacific economies in 2007, UNESCAP said today at the launch of its annual Economic and Social Survey of Asia and the Pacific entitled “Surging Ahead in Uncertain Times.”
The region’s oldest and most comprehensive annual review of economic and social developments forecasts the external environment in Asia-Pacific to be less favourable in 2007, mainly due to the slowing of the US economy and a moderate decline in global electronics demand, but sees continued dynamism despite risks of further oil price shocks, and a sharp depreciation of the US dollar.
“As a whole the 2007 outlook is above 7% economic growth,” noted UNESCAP Executive Secretary Kim Hak-Su ahead of the launch. “The three big Asian economies – China, India, and Japan – will maintain the growth momentum and may provide good opportunities to other developing countries.”
The Survey says that the region is becoming the locomotive of global growth. Developing economies in the Asia-Pacific region accounted for 16% of global output and one-third of world economic growth in 2006.
In a special study on the cost of gender discrimination to the region’s economies, the 2007 Survey estimates that the region is losing US$42-47 billion a year due to restrictions on women’s access to employment, and another US$16-30 billion a year because of gender gaps in education.
Economic Outlook for 2007
The Bangkok-based Economic and Social Commission for Asia and the Pacific (UNESCAP) forecasts major currencies in the region to appreciate as a result of capital inflows and imbalances in the US economy. According to the 2007 Survey, the region’s Central Banks can choose any two of three policy options: targeting exchange rates, having an independent monetary policy, or keeping capital accounts open – but not all three. It sees greater exchange rate flexibility as one sustainable solution that would take away the “one-way bet” that encourages speculative capital inflows.
The Survey warns that interventions by monetary authorities to keep currencies down are leading to inflated asset values, especially in housing and equity markets.
According to the Survey, developing economies in the Asia-Pacific region is expected to grow at an impressive 7.4% in 2007, though down from 7.9% in 2006.
The Survey says that as the international economic environment weakens, momentum in the region is expected to come from China, India and Japan. A rebound in growth in South-East Asian economies will add to the region’s growth momentum.
It projects inflation to be less of a problem in 2007 – at 3.8% in developing Asia-Pacific economies, down from 2006.
Downside Risks in 2007
The Survey sees six major downside risks to baseline forecasts for 2007: an oil price shock; an abrupt cooling of housing markets in the United States; a disorderly unwinding of global imbalances; a reversal of the Japanese economic recovery; economic “overheating” in China; and an avian flu pandemic.
Ten years after the Asian financial crisis, all of the countries affected, except for Malaysia, displayed renewed economic vulnerability at the end of 2006. Vulnerability is also a concern in some of the region’s other emerging economies, such as Pakistan and the Russian Federation.
Special study: Gender inequality continues – at great cost
UNESCAP estimates the region is losing US$42-47 billion a year because of restrictions on women’s access to employment – and another US$16-30 billion a year because of gender gaps in education.
If its female work force participation was placed on a par with United States, according to the 2007 Survey, India’s gross domestic product (GDP) would be lifted by 1.08 percentage points – a gain to the economy of US$19 billion. Significant gains could also be achieved in Malaysia and Indonesia, but less for China, where female labour force participation is already considerably higher.
Failure to allow women to realize their economic potential in the work place has led to gaps of between 30 and 40% in male-female labour force participation rates across the region.
Disparities exist over a wide range of areas – from low access to education and health services, to economic opportunities and through to political participation.
According to the Survey, gender balance can be achieved at minimum of effort and cost provided there is political commitment at the highest level.
The 2007 Survey also contains a review of the region’s economic performance in 2006; an evaluation of subregional performance, challenges and policies; and a discussion of five key policy issues on its watch list: monitoring vulnerability to currency crisis; boosting domestic demand through private investment, especially in East Asia; reaping the one-off demographic dividend; managing urban growth; and promoting green growth to sustain development.
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