Asian economy prepares for choppy seas

The outlook for Asia and the Pacific is the strongest in the world, but it is shrouded by challenges at home and abroad, according to the latest International Monetary Fund report for the region. The April 2017 report, Regional Economic Outlook for Asia and Pacific: Preparing for Choppy Seas, says policy stimulus continues to support strong domestic demand in China and Japan in the near term, which is good for other economies in Asia as well. Broader global conditions are also favorable. Growth is accelerating in many major advanced and emerging market economies, notably the United States, and commodity exporters, and financial markets are still resilient for the most part. Nonetheless, there are challenges ahead. Particularly, over the medium term, there are fundamental headwinds to sustained strong growth, including aging populations in some countries and a slower catch-up in productivity.

After a slowdown last year, regional growth is forecast to speed up this year. Growth in the region dropped from 5.6 percent in 2015 to 5.3 percent last year despite broad improvement in economic activity in the second half of 2016. Net exports continued to pull down growth, but domestic demand remained strong, supported by robust private consumption. GDP growth is forecast to reach 5.5 percent in 2017, revised up by 0.1 percentage points compared to the estimate in the IMF's October 2016 World Economic Outlook, and 5.4 percent in 2018. Accommodative policies will underpin domestic demand, offsetting tighter global financial conditions.

The aggregate outlook for the region, however, masks differences across economies. Among the larger economies, projected growth in China and Japan for 2017 was revised up because of continued policy support and improved growth momentum toward the end of 2016.