Asia-Pacific nations face a year of slowing growth caused by troubled export markets and rising commodity prices, an annual United Nations report warned Thursday.
But despite the gloomy outlook, the region will remain the fastest growing in the world this year, the UN’s Economic and Social Commission for Asia and Pacific (ESCAP) survey found.
Asia-Pacific growth will edge down to 6.5 percent in 2012 from 7.0 percent last year as the rumbling eurozone debt crisis and continued uncertainty over the US economic outlook weaken demand for exports, it said.
The region also faces a “new normal” of volatile commodity prices that the UN warned will hit the poor hardest unless governments make plans to soothe pain of higher costs.
“The greatest threat to the Asia-Pacific region is a disorderly debt default in the eurozone,” UN under-secretary Noeleen Heyser said at the launch of the report.
“If it (the eurozone) unravels it could lead to a $390 billion loss in the region over 2012 and 2013,” she said, adding that the scenario would hamper efforts to cut poverty by keeping more than 14 million people in the region below the $1.25-a-day poverty line.
Renewed political deadlock in Greece and the election of a new French president this week raised the possibility of a renegotiation of a key European Union deal to cut massive debts, adding further uncertainty to global markets.
But Heyser said Asia-Pacific governments are well-placed to tweak economic policies to meet the difficulties ahead.
“The region is facing key challenges… but it has continued being an anchor of stability and a growth pole for the world economy,” Heyser said.
The survey, an annual check-up on the region’s progress, urged governments to prepare for a slew of economic and social challenges that will shape their development.
Speculative inflows of money, over-reliance on natural resources, income inequality and high rates of unemployment – particularly among the young – will all require careful political attention, it said.
“Social development in the region has been restricted because of income inequality… it is rising at a very worrying rate,” Heyser said.
“It’s critical to look at how wealth is generated. It cannot be just asset-led,” she added, explaining that higher employment rates with better pay would be a more sustainable route to growth.
She said nations must avoid the “resource-curse” of dependence on extractive industries and work towards building service economies capable of competing with developed economies in the long-term.
Last year’s disasters in Japan, Thailand and Pakistan – estimated to have caused $260 billion losses – were also a warning that inter-linked regional economies remain vulnerable to sudden shocks, the report said.