ADB Chief Economist Shang-Jin Wei discusses the macroeconomic outlook for developing Asia in 2015 and beyond. He also looks at how the region can take advantage of the current low oil prices and the impact of the strengthening US dollar on economies in Asia and the Pacific.
Title: Asian Development Outlook 2015
Description: ADB Chief Economist Shang-Jin Wei discusses the macroeconomic outlook for developing Asia in 2015 and beyond. He also looks at how the region can take advantage of the current low oil prices and the impact of the strengthening US dollar on economies in Asia and the Pacific.
Q: By how much is developing Asia forecast to grow in 2015 and 2016?
A: "We expect developing Asia to grow at 6.3%, both for this year and next year, on the back of strong reforms in many of our countries, stronger recovery in high-income countries, and reduction in commodity prices."
Q: What is the outlook for the region's two largest economies, People's Republic of China (PRC) and India?
A: "PRC is expected to moderate its growth rate to about 7.2% for this year and 7.0% next year due to a combination of rising labor costs, shrinking working age population, and strong currency.
On the other hand, India will surpass PRC in terms of its growth rates and expected to grow at 7.8% this year and 8.2% next year due to reforms and due to some revisions in the way data are computed."
Q: What are the main risks to the outlook?
A: "One of the external risks is deeper-than-expected recession in Russia and perhaps if European economies not doing as well as it currently looks, this would affect our economies [through] export to Europe and derived remittances from Russia.
Internally, these two giant economies, if PRC and India are not doing as well as we are forecasting due to their sheer size and their spillover to other countries, this would also affect our outlook."
Q: How can lower oil prices benefit countries in developing Asia, both oil importers and exporters?
A: "Most countries in our region are net importers of oil, lower prices means lower cost of production and also lower cost of living for households, therefore higher real income and real consumption opportunities. So that's a gain.
For oil exporters, in the short run, lower prices are not good news for them. On the other hand, many of these economies wish to diversify their economy into having a greater manufacturing sector. This could be [an] opportunity for them to use these lower prices and lower exchange rates to develop those manufacturing sectors, to make it more competitive."
Q: What impact is the strengthening dollar having on economies in developing Asia?
"Of course, US is a very important market for any of our countries' exports. Higher dollar means more competitive exports for these countries, and that's one channel for the gain.
On the other hand, for those countries or companies in those countries that have dollar-denominated debts, this could be a source of vulnerability. So, countries need to undertake measures to safeguard stability."