A new United Nations report
says Asia Pacific economies face subpar growth in 2014, fueled by international trade protectionism and against the backdrop of added uncertainties after the U.S. Federal Reserve announced it is scaling back efforts to boost the American economy. While China remains a mainstay of the region's growth, protectionist measures by the European Union and United States have cost exporting nations more than $60 billion in lost trade over the past two years.
The report released Thursday by the UN's economic commission for Asia and the Pacific [UNESCAP] says regional growth remains below levels before 2008 amid a backdrop of uncertainties in the U.S. and European Union economies, as well as regional issues and growing economic inequalities.
China remains the linchpin in the regional economic fabric, with U.N. economists forecasting better than 7.0 per cent in 2014. Overall growth for the Asia Pacific developing region, though, is at a sub-par 6.0 per cent.
The U.S. Federal Reserve decision to taper off its massive stimulus program in 2014 is set to reduce funds making their way to regional investment markets. Economists say capital volatility may reduce economic growth in Malaysia, the Russian Federation, Philippines and Thailand.
UNESCAP economist, Anisuzzaman Chowdhury, said the weaker outlook will affect how governments address issues such as growing income inequalities and the environment.
"We are likely to continue to have sub-par growth and that will have implications for what we can do to address inequalities, to address the environmental issues, because you need growth and you need money to address those things. So that is why we said (the region) is at a tipping point. You need to really look at very hard how we conduct our business, our structural impediments," said Chowdhury.
The economies of China and India together account for over half of the gross domestic product, or GDP, of the developing Asia Pacific region and remain crucial drivers of economic growth.
Chowdhury said China's policy shift towards boosting domestic consumption is set to have wider implications for the region.
"China's economic growth has been driven so far by investment. Now it will be what the Chinese Government is doing consciously - re-orienting these policies to address various disparities - they will now look at raising wages. So there will be demand from China for consumer goods. For countries which are exporting consumer goods to China they will benefit. So that rebalancing is happening," said Chowdhury.
The U.N. says a key concern has been the rise of international trade protectionism, which has cost Asia Pacific developing economies more than $62 billion in lost export value in trade over 2012 and 2013 alone, especially affected by measures adopted in the European Union and United States.
The concerns over trade protectionism come despite the recent agreement on the World Trade Organization [WTO] Doha round negotiations. Protectionist policies have included anti-dumping measures, import tariffs, customs procedures, and other restrictions.
The U.N. says China's economy was the hardest hit with $13.5 billion worth of exports negatively affected over the past two years, along with Russia, South Korea, and exporters in South Asia and Southeast Asia.
The report says Thailand and Malaysia have faced slowing growth and rising household debt, while policy uncertainties have led to sharp declines in the currencies of India and Indonesia.
The U.N. says the Asia Pacific is now facing the "new normal" of subpar growth and calls on governments to implement policies to better manage the volatility triggered by short term capital flows, as well as support small and medium sized enterprises.