The outlook for the world economy appears challenging. Many emerging economies face lower growth rates and financial markets remain volatile. The stability of the European market is challenged by the Brexit vote in June. In addition, non-economic risks are rising. Markets in Asia (in ASEAN), however, continue to offer good opportunities. Global challenges demand innovation.
Global economic growth remains fragile and difficult to predict. Although advanced economies show a further gradual economic recovery, the impact of Brexit and the result of the election in the USA on the markets in the medium term remain to be seen. Growth in many emerging economies remains subdued and unstable. According to the IMF, global economic growth rates for 2017 are only expected to pick up slightly to 3.5 percent.
Asia is and will remain the most important growth region of the world. In 2016, growth for the region is expected around 5.5 percent according to the IMF. With this, it will further establish itself as the economic powerhouse of the world. ASEAN – as part of the region – is becoming especially attractive.
One of the factors contributing to this is the rebalancing of China’s economy. With the aim of making growth sustainable in the long run, the central government is shifting the economy away from manufacturing and exports towards services and domestic demand. As a result, growth rates in China have been falling and are expected to normalize at around 6 percent.
Economies in Southeast Asia, such as those of Indonesia, the Philippines and Vietnam, are adding to Asia’s positive momentum. They offer important markets with middle-class consumers.
A number of risks prevent the Asia region outlook from being more positive. A sharper than expected monetary tightening in the US could result in a further slowdown of growth in emerging markets. The high indebtedness of China’s LGUs and government-controlled businesses will have to be watched as they pose a risk to economic stability. The long-term stability of China can only be secured through structural reforms.
However, the potential for growth is also present. A multitude of global challenges require innovative solutions: uncontrolled urbanization in many emerging economies (including the Philippines), climate change and negative demographic developments in Europe and Japan are among these. These challenges can be best addressed when globalization, digitalization and the increasing use of human capital work together to provide new solutions. Productivity and growth can then be re-accelerate.
Cities will determine our future. Since 2008, more than half of the global population has settled in urban environments. This trend is set to continue for many years with the UN forecasting that more than 70 percent of the world population will live in cities by 2050.