Emerging Asia will contribute less to the global economy in 2015 than was expected just months ago as a slowdown in China drags on growth in the region, partially offset by acceleration in the United States, Reuters polls showed. Until recently the primary engine of global growth, most Asian economies have slowed, hamstrung by erratic exports, sluggish domestic demand, capital outflows and political and policy uncertainty.
At the same time, many of Asia's major trading partners in the West are grappling with disinflation and weak demand, making it difficult for central banks there to move away from aggressive monetary stimulus. Estimates for 2015 GDP growth were either cut or left unchanged for nine Asian countries in the latest poll of over 200 economists conducted over the past week, with Hong Kong, Indonesia and Singapore bearing the brunt of the downgrades.
India, Malaysia and Thailand were the few economies for which economists made slight upgrades to growth projections. These latest lacklustre forecasts follow a similarly tepid performance this year, during which China's economy slumped to its slowest pace of growth since the global financial crisis. "The Chinese economy is unbalanced at present with an excess of investment, much of which has been financed via debt," said Jay Bryson, global economist at Wells Fargo.
"The slowdown that is under way in China is partially policy-induced, and the days of double-digit Chinese economic growth appear to be a thing of the past." China's economy is expected to expand 7.4 percent this year, narrowly missing the government's 7.5 percent annual target, as Beijing tries to derive more future growth from consumer demand rather than exports. In 2015, economists predict growth to slow further to 7.1 percent.
Also among the primary reasons for the protracted slowdown is the risk that China's overheated property market might crash, triggering ripple effects through a highly leveraged economy and further dragging on consumer demand. While Beijing has undertaken targeted stimulus to ease business lending, liquidity and housing regulations, economists do not expect a major shift in policy or lower interest rates from the People's Bank of China.
Effects from a slowdown in the world's second largest economy have trickled through to South Korea, Hong Kong, Singapore and Indonesia, with growth estimates downgraded in the latest survey. India, Asia's third largest economy, was among the few bright spots. Growth there is expected to pick up to its fastest pace this fiscal year since 2010-11 on the view that Prime Minister Narendra Modi will unveil much needed reforms to attract investment.
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