Growth in Asia-Pacific economies softened to 3.1 percent in the second quarter of this year from 3.2 percent in the first and 3.4 percent a year earlier in line with the slowdown in global trade, the latest Asia-Pacific Economic Cooperation (APEC) Economic Trends Analysis showed.
“Economies across the Asia-Pacific continue to grow but find themselves in a holding pattern of lower growth in the absence of high trade volumes,” said Alan Bollard, Executive Director of the APEC Secretariat.
“Private consumption is helping to compensate but must be tapped into more aggressively to keep the regions’ economies on track.”
“Market uncertainty and protectionist pressures are a concern but trade distorting measures have been generally kept at bay,” Bollard said.
“The fact is that economies in the region are still highly trade dependent and opportunities to grow are very much out there but there is a recognition in APEC that traditional approaches are not enough. When you have large sections of the economy that are participating at sub-optimal levels it can greatly undermine progress,” he added.
The responsiveness of GDP growth to private consumption is increasing markedly as exports contract, the reports said. In contrast, the trade-GDP relationship continued to weaken, with trade in the APEC region contracting during the first half of 2015.
Goods exports are expected to rise by 2.3 per cent for the full year and climb to 3.3 per cent in 2016 in response to rebounding global demand. However, this is still more than a percentage point below 2014 levels.
APEC economies must take greater steps to translate trade and economic growth to inclusive growth, defined by improved income growth and distribution, the reports explained.
Trade growth over the past quarter of a century has lifted incomes but it has not
significantly contributed to reducing inequalities in the APEC region. To combat this, the reports recommended trade openness be accompanied by policies that enable inclusive growth.
“Policies such as human capital investment, social protection, labor market reform, financial market reform as well as institutional reform could help to ensure that the benefits of economic integration are widely felt,” said Denis Hew, Director of the Policy Support Unit, which authored the reports.
“Working out the details is something that will take time but ultimately determine whether the value of greater interconnectedness can live up to its full potential,” Hew said.
“Efforts by APEC member economies to support micro, small and medium enterprises to globalize and gain access to international production and supply chains are important steps in the right direction,” he added.