Growth Sustained by Intra-Regional Trade, Investment

Growth Sustained by Intra-Regional Trade, Investment, and Domestic Consumption,Noted Trade Ministers

Surabaya, Indonesia, 20 Apr 2013 - Despite a setback to global economic recovery in 2012, growth in the APEC region was sustained by a rise in intra-regional trade, investment and domestic consumption, according to new APEC Policy Support Unit research that was presented at the APEC Ministers Responsible for Trade meeting earlier today in Surabaya, Indonesia.

Real global GDP growth slowed to an estimated 3.2 percent in 2012 from 3.9 percent in 2011. Although real GDP in the APEC region grew by an estimated 4.1 percent in 2012, the same growth rate as in 2011, weak import demand from Europe and the United States caused growth to vary among APEC members.

“GDP growth in the newly industrialized Asian economies slowed sharply to 1.7 percent in 2012, less than half of the growth rate in 2011” said Dr. Denis Hew, Director of APEC’s Policy Support Unit. “This is partly due to reduced export demand for IT goods.”

“But on the other hand, some APEC economies in Southeast Asia and Latin America enjoyed strong growth due to increasingly resilient domestic consumption and investment, offsetting the weakness in the export sector.”

In addition, foreign direct investment (FDI) inflows or the amount of foreign corporate investment coming into Chile rose by 53 percent while Peru saw a 34 percent increase.  Several Southeast Asian economies, including the Philippines, Thailand and Viet Nam, also enjoyed an increase in FDI inflows while Indonesia maintained its record high level.

This surge of capital flowing into emerging markets in 2012 is partially a result of expansionary monetary policy by some advanced economies, creating ultra-low interest rates and an abundance of liquidity.

“At the same time, these low interest rates and abundant liquidity in emerging markets have also created risks for the APEC region, including the possibility of asset price bubbles,” said Dr. Alan Bollard, the APEC Secretariat’s Executive Director. “This issue is being played out in some Asian property markets and is of concern.”

Another worry is the virtually non-existent trade growth in the world. Trade performance in 2012 was hard hit by weak import demand from Europe and other developed economies. For the APEC region, the value of exports grew by just 2.6 percent in 2012 to USD 8.7 trillion, indicating a significant slowdown from a growth rate of 17.2 percent in the previous year.

However, intra-APEC trade numbers were encouraging as trade within the APEC region outperformed the rest of the world, growing by 3.9 percent compared with a contraction of 1.8 percent for the rest of the world.

“Still, the uncertainty and uneven recovery in the global economy presents concerns for the Asia-Pacific region,” explained Dr. Bollard. “A challenge will be to resist protectionism in the region and globally.”

“One of our recommendations to the Ministers at their meeting in Surabaya is to promote collective action in the APEC region and the wider global community to refrain from raising new trade barriers and protectionist measures,” added Dr. Hew. “Ultimately, sustaining our momentum towards free and open trade will be the only way to ensure prosperity for the region in the long-term.”

APEC Trade Ministers noted the report at their meeting in Surabaya, Indonesia on Saturday.

ENDS

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