Pacific Money

A Better Year: 2013 Forecast for Asian Economies

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Pacific Money

A Better Year: 2013 Forecast for Asian Economies

After a tough year in 2012, the IMF and World Bank expect many Asian economies to recover.

Leadership changes in China, Japan and South Korea along with the United States have marked another tumultuous year for the Asia-Pacific region. With 2013, the Year of the Water Snake in Chinese mythology, around the corner, what might be in store for the region’s economy?

According to “feng shui experts” quoted by Malaysia’s top-selling daily The Star, the snake year that commences in February will be a favorable one for industries related to “water, wood and metal elements,” including education, finance and insurance, media and metal and mineral-related businesses.

Not so lucky will be those in construction, property and telecommunications, according to the experts.

For branding purposes, blue is seen as the most favorable color as it represents the water element, while red and yellow are out since they stand for fire and earth, respectively.

Unfortunately the prediction spells bad news for Australia’s red-colored ruling Labor Party led by Prime Minister Julia Gillard, who will face off against the blue Liberal/National Party coalition led by Opposition Leader Tony Abbott in a general election this year.

Elsewhere in the region, elections are also due in Cambodia, Malaysia, Mongolia and the Philippines, where the predictions of the feng shui experts will also be tested.

Economic growth upturn

Asia will be keenly anticipating a better year ahead after a tough 2012, in which economic growth plunged during the first half of the year to its lowest rate since the 2008 global financial crisis.

The International Monetary Fund anticipates the region will “remain the global growth leader,” expanding over two percentage points faster than the world average in 2013, although downside risks remain in the Eurozone crisis and U.S. budgetary negotiations.

The IMF expects Asia’s growth to expand to 6 percent in 2013, a modest improvement on the previous year, aided by strengthening external demand and accommodative policy stances.

In its October 2012 report, the fund forecast China’s 2013 growth at 8.2 percent, with India expected to grow by 6 percent, Taiwan 3.9 percent, South Korea 3.6 percent, Australia 3 percent and Japan just 1.2 percent.

However, the IMF noted that with around two-thirds of emerging Asia’s exports dependent on demand from markets in Europe and the United States, further economic difficulties in its major customers could drag down Asia’s overall performance.

However, in December the World Bank was more upbeat concerning the region’s prospects, stating that the economies of developing East Asia and the Pacific had “remained resilient despite the lackluster performance of the global economy.”

The World Bank expects the region to post 7.9 percent growth in 2013 with domestic demand the main driver of growth given weak external demand.

The region is expected to contribute almost 40 percent of global growth in 2013, similar to the level achieved in 2012, with China’s slowdown the main drag on recent performance.

In 2013, China is expected to achieve economic growth of 8.4 percent, aided by fiscal stimulus, after recording its worst performance since 1999 in 2012.

Developing East Asia, excluding China, is expected to post 5.7 percent growth in 2013, helped by continuing strong performances by Indonesia, Malaysia and the Philippines.

And as previously reported by The Diplomat, loosened purse strings in Australia, Japan and elsewhere are expected to boost growth prospects in 2013. The “lucky country,” Australia, is expected to continue its 21-year winning streak with a growth rate of 3 percent in 2013, according to the Reserve Bank of Australia, while Japan is set to emerge from a mild recession and South Korea is expected to expand government spending.