Asia-Pacific economies to grow by over 7 per cent, but risks ahead – UN report

Asia-Pacific countries are set to grow by over 7 per cent this year, although the region will face several economic challenges, primarily the management of exchange rates, the United Nations says today in its annual regional economic review.

In the report, the UN Economic and Social Commission for Asia and the Pacific (UNESCAP), forecasts a less favourable external environment mainly due to the slowing of the United States economy and a moderate decline in global electronics demand, but still sees continued dynamism despite the sharp depreciation in the United States dollar.

“As a whole the 2007 outlook is above 7 per cent economic growth. The three big Asian economies – China, India, and Japan – will maintain the growth momentum and may provide good opportunities to other developing countries,” said Kim Hak-Su, Under-Secretary-General and Executive Secretary of UNESCAP, ahead of the launch.

The survey, Surging Ahead in Uncertain Times, says the region is becoming the locomotive of global growth, and notes that developing economies in the Asia-Pacific accounted for 16 per cent of global output and one-third of world economic growth last year.

It also forecasts major currencies in the region to appreciate as a result of capital inflows and imbalances in the US economy and says that 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, but warns that intervention by monetary authorities to keep currencies down are leading to inflated asset values, especially in housing and equity markets.

A special study focusing on gender inequality estimates the region is losing between $42 billion and $47 billion a year because of restrictions on women’s access to employment – and another $16 billion to $30 billion every year because of gender gaps in education. But the survey says that gender balance can be achieved at minimum cost and effort, provided there is political commitment at the highest level.

The report highlights that if India’s female work force participation was placed on a par with the US, then its gross domestic product (GDP) would be lifted by 1.08 percentage points – a gain to the economy of $19 billion.