Asia Outlook

As we start 2017, and national accounts data for 2016 begin to be released, we can see that growth expectations have trended downwards for a number of countries in the Asia Pacific region over the past twelve months. One example is South Korea where forecasts are falling as the nation battles with rising levels of household debt and high youth unemployment. Latest reports indicate that the government is planning to spend big during the first quarter and that a supplementary budget may be deployed should economic conditions deteriorate further. Elsewhere, forecasts have also steadily declined for Australia. The cabinet’s recently published midyear economic and fiscal outlook shows that government borrowing for the next four financial years is now predicted to be more than A$10bn higher than at the last review in May. Worryingly, some commentators believe that a lack of control over taxation and expenditure may cause Australia to lose the triple A rating which it currently possesses with each of the three major credit rating agencies. Despite weakness in the aforementioned countries, there are some bright spots in the region. For instance, New Zealand continues to reap the benefits of high immigration and a housing market boom. Q3 national accounts statistics revealed that GDP was up by a robust 3.5% (y-o-y) and, despite the shock resignation of Prime Minister John Key in early December, the growth outlook does not appear to have been dented as new leader Bill English is likely to pursue similar policies to Mr. Key.

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