The International Monetary Fund (IMF) has termed the Asia Pacific region as 'world leader' in GDP growth as it raised the economic growth for the region to 5.5% for 2017 from 5.3% in 2016. The strong momentum will continue with growth projected at 5.8% for 2018.
The 2017 Regional Economic Outlook posited that the US could boost interest rates for the region through a Fed rate hike coupled with an expansionary fiscal policy. However, US President Donald Trump's protectionist rhetoric might pose a number of uncertain risks within the region.
The report had also outlined certain short-term risks inherent within the region, mainly attributed to the region's rapidly ageing population, incurring the risk of Asia "growing old before becoming rich".
The report also outlined specific risks for the region's large economies like China, Japan, and India.
China's transition to a supply-side economic policy and a services-oriented model needs to be carried out carefully, as some temporary shocks during the process could have large spillover effects across the region. Rapid credit expansion could also prove to be a major risk if it is unchecked. However, the report forecasts short term growth due to the government's supportive policy measures, particularly in the real estate sector, along with an upward trend in inflationary pressure. China's GDP is estimated to grow by 6.6% in 2017.
Japan is also projected to maintain a strong growth momentum throughout the year, with GDP growth projected at 1.2%. Strong exports data has largely contributed to the strong growth, which could be further reinforced by an expansionary fiscal stimulus and a delay of the value added tax hike from 2017 to 2019.
India had faced a slowdown in growth during 2016 due to distortions in spending caused by Prime Minister Narendra Modi's demonetisation initiative. However, the distortion is set to dissipate in 2017 with growth projected at 7.2%. The report highlights the possibility of a slow-down in credit growth due to weak corporate and bank balance sheets. However, a consistent fiscal consolidation and anti-inflationary monetary policy would ensure macroeconomic stability.