Keeping tabs on the economy as 2018 begins

Asia News Network partners focus on the outlook for economic growth this year. Here are excerpts:

Protectionism casts shadow

The Yomiuri Shimbun, Japan

The world economy is finally and fully emerging from the impact of the collapse of US investment bank Lehman Brothers.

For the world economy to continue growing stably in the era of globalisation, major countries are required to make efforts to cooperate more closely than ever before.

The Organisation for Economic Cooperation and Development (OECD) projects that the global economy will grow by 3.7 per cent this year, up from the 3.6 per cent forecast for last year. All 45 countries covered by the OECD survey are reckoned to have achieved positive growth last year, for the first time in the decade since 2007. This trend should be strengthened.

In developed countries like Japan, the United States and Germany, employment conditions have improved and the upward trends in their stock prices are strong. A virtuous cycle is taking shape, with the underlying strength of major economies prompting expansion in demand and stimulating trade - effects that also benefit emerging market economies.

Seemingly, the global economic outlook looks firm. Underneath, however, many pitfalls lurk.

One cause for concern is an inclination towards protectionism on the part of US President Donald Trump, who advocates an "America First" policy. Shortly after he took office, the US withdrew from the Trans-Pacific Partnership (TPP) free trade pact. Meanwhile, in a high-handed move, he made Canada, Mexico and South Korea renegotiate with the US their free trade agreements.

Should the US forcibly implement unilateral import restrictions, its trade partners will have no alternative but to resort to countermeasures.

In protecting free trade, the role to be assumed by Japan is great.

A broad agreement has been reached on an 11-nation TPP, without the US, and on a Japan-EU economic partnership agreement. It is important that Japan accelerate coordination with the nations and organisations involved, aiming to quickly sign and put into effect these pacts.

A turning point for HK's economy

Paul Yeung
China Daily (Asia), Hong Kong

2017 has come to an end. Reviewing the performance of the Hong Kong economy over the past 12 months, we can come to the conclusion that 2017 was a blessed year for the city.

According to the latest official statistics, the local economy continued to expand in the third quarter, growing a notable 3.6 per cent from a year earlier, the fourth consecutive quarter of above-trend economic expansion. Exports of goods maintained visible growth in the third quarter and exports of services also picked up. Meanwhile, the labour market remained in a state of full employment, with wages rising in real terms.

2017 was not just another year for Hong Kong. We celebrated the 20th anniversary of the establishment of the special administrative region. During this significant year, some key factors have provided a window of opportunity for Hong Kong to adopt strategic changes in its economic structure to deal with some internal problems. These favourable factors included the Lok Ma Chau project unveiled in January and the Guangdong-Hong Kong-Macau Greater Bay Area development plan mentioned in Premier Li Keqiang's annual report delivered two months later.

The Lok Ma Chau project will be a stepping stone for Hong Kong to promote innovation and technology development in Hong Kong. According to the agreement, Hong Kong and Shenzhen will jointly develop an innovation and technology park at the Lok Ma Chau Loop. The 87ha park, a site four times bigger than the existing Hong Kong Science Park, will be the largest innovation and technology platform ever set up in Hong Kong.

The Greater Bay Area, or GBA, will act as a new and high-profile strategic platform for Hong Kong's economic development.

Did 2017 really mark a turning point for Hong Kong's economy? It depends on whether Hong Kong can act proactively to grasp opportunities and adopt the necessary policies this year.

A bull brought in for a New Year ceremony at the Korea Stock Exchange in Seoul on Tuesday. South Korea's per capita GDP is set to reach US$32,000 (S$42,460) this year, if all goes well with President Moon Jae In's economic policy plan, but there is a gap between the government's road map and reality, says The Korea Herald editorial. PHOTO: AGENCE FRANCE-PRESSE

Gaps in S. Korea's economic plan

The Korea Herald, South Korea

The economic policy plan for this year announced by the government reflects the tendency of government economists to be optimistic about economic prospects and the effects of policy programmes. A close look at the yearly economic blueprint reveals many loose ends.

The plan is highlighted by the projection that the Korean economy will grow by about 3 per cent - not so disappointing in view of the fact that South Korea has been stuck in a low-growth trap.

Per capita gross domestic product is set to reach US$32,000 (S$42,460) this year, which would make South Korea the third Asian country to exceed the US$30,000 level - after Japan and Australia.

The projections are based on the assumption that all will go well with President Moon Jae In administration's efforts for its economic priorities, including job creation, income-and innovation-led growth, quality of life and fairness. However, there is a gap between the government's road map and reality. Take job creation - the Moon government's top priority - as an example.

Officials said the government would earmark 19.2 trillion won (S$24 billion), compared with 17.1 trillion won last year, for job creation. The problem is that the job creation plan focuses on increasing employment in the public sector - the central and local governments and public agencies and corporations. Part of the job creation fund will also go to the private sector in the form of fiscal subsidies, tax benefits and other incentives.

But the job creation plan falls far short of alleviating the unemployment problem, especially among youth.

As with the job creation plan, the biggest problem with the innovation-led growth plan is that the government is taking charge, instead of making the private sector the driving force.

The Moon government's economic policy is built around ensuring a virtuous circle in which greater income for the low-income bracket leads to increased consumer spending, which in turn helps expand corporate investment and hiring. The economic policy plan largely overlooks the role of the private sector in completing the virtuous circle.

Rosy outlook for Indonesia

The Jakarta Post, Indonesia

Most key indicators of the financial market last year were quite positive. The composite index at the Indonesian stock market rose by 20 per cent to an all-time high of 6,355. The rupiah remained virtually stable with a depreciation of merely 0.8 per cent with a volatility range of only 3 per cent, as against 8 per cent in 2016.

With inflation kept at below 3.6 per cent, foreign trade was in surplus - albeit with a small amount of US$12 billion (S$16 billion) as of November, and foreign reserves were also at a record high of US$126 billion, or equivalent to over eight months of imports. The outlook could generate a high sense of confidence.

Investment growth was at its highest in more than four years. Not only portfolio capital inflows but foreign direct investment recorded the largest net inflow in over seven years. Export and import volumes both registered double-digit growth. Considering continued subdued food prices and the absence of further planned energy price hikes this year, consumer price inflation is expected to be below 4 per cent this year.

In line with the stronger macroeconomic outlook and ongoing tax policy and administration reforms, the consensus forecast among both the government and private sector is for growth of between 5.3 per cent and 5.5 per cent this year, up from an estimated 5.1 per cent last year.

But complacence would be misguided. A long agenda of structural reforms has yet to be implemented to make the economy more efficient and competitive.

  • The View From Asia is a compilation of articles from The Straits Times' media partner, Asia News Network, a grouping of 23 news media entities.
A version of this article appeared in the print edition of The Straits Times on January 06, 2018, with the headline 'Keeping tabs on the economy as 2018 begins'. Print Edition | Subscribe