A new United Nations report warns export growth in Asian and Pacific nations may fall by half this year due to slower growth in Europe, Japan and the United States. The U.N.’s regional economic and social commission chief also says while the overall economic outlook remains positive, uncertainties about the U.S. government’s ability to increase in its debt ceiling undermine confidence.
The U.N. economic commission for Asia and the Pacific (UNESCAP) says maintaining economic growth in the region remains a challenge following the global financial crisis.
Asia’s export sector relies heavily on demand from Europe, the United States and Japan. But slow growth in those countries means smaller markets for Asian goods.
In a report issued Monday, the U.N. said the developing economies of Asia and the Pacific may see export growth drop by almost half to 9 percent in 2011 from over 17 percent last year. In 2009, at the worst of the economic crisis, Asian exports fell 8 percent.
While the region still draws foreign direct investment, 75 percent of that money goes to just five economies - China, Hong Kong, India, the Russian Federation and Singapore.
Noeleen Heyzer, the UNESCAP executive secretary, says the recovery in trade has largely been drive by sales within Asia.
“What this report says is that export trade is back to its pre-crisis level. But it’s mainly due to intra-regional trade," said heyzer. "In fact, intra-regional trade has increased - it represents about 51 percent of all trade in the Asia Pacific region.”
The report also says many economies in the region are gradually relying less on exports. Instead, they look for growth from growing urbanization, especially in China and India, rising domestic incomes, increasing imports from lower-income Asian nations and a shift toward more intra-regional direct investment.
But Heyzer says the region is full potential in trade is undermined by impediments such as bureaucratic red tape, leading to higher costs.
“It is extremely difficult to do cross-border trading," she said. "In fact it is more expensive - it is 30 percent higher in terms of say for ASEAN [Association of Southeast Asian Nations] to trade with northeast Asian economies than it is for northeast Asian economies to trade with the U.S.”
Heyzer says the region faces uncertainties, including climate change, rising food and energy costs, foreign exchange volatility, and sluggish demand in developed economies.
She also warns regional business confidence is being undermined by the U.S. failure to agree on an increase in the federal debt ceiling. Asian nations, led by China and Japan, are among the largest foreign holders of U.S. Treasury securities.