In a recent media roundtable in Singapore, Allianz’s Chief Economist, Dr Heise predicted that over the next 18 months, the growth in Asia will remain resilient, supported by the economic momentum in China. Following a 3 year slump starting from 2014, Dr Heise said that both global and Asia trade has recovered, with Allianz forecasting Asia (ex-Japan) growth of 6% and 5.7% in 2017 and 2018 respectively.
However, a caveat lies in the huge build-up of private debt in Asia owing to the low interest rate environment. He expects central banks and regulators in the region to move in concert to reduce rising private debt, and thus predicts no further easing of rates for the remainder of 2017. “I believe financial stability would be the goal of Asian central banks this year,” he said.
The downside risks to the region include a ramping up of protectionist measures from the US and increased geopolitical tensions, possibly arising from a conflict in the Korean peninsula or territorial disputes amongst various actors in Asia.
On the uncertainty regarding economic policies that will be pursued by the US administration, Mr Heise does not expect a shift towards outright protectionist measures as that would have repercussions for the American economy as well.
However, he noted that political and economic sentiments globally have turned more inward-looking and thus the pace of globalisation will slow down in the years ahead. “Global trade will likely not grow faster than global GDP as a result,” said Mr Heise. World Trade Organisation (WTO) figures for 2016 showed world trade had grown more slowly than GDP for the first time in 15 years.