Growth in the Asia-Pacific Economic Cooperation (APEC) region is expected to moderate to 3.8% in 2019, down from 4.1% in 2018, as trade tensions continue to undermine global trade, investment and output, says a new report by the APEC Policy Support Unit.
In 2020, GDP growth for the region is projected to decelerate further to a range of 3.5% to 3.7%, the report forecasts. However, downside risks may be mitigated if trade frictions ease.
“The upside potential for growth could come from the quick and positive resolution of trade tensions—that would significantly reduce policy uncertainty,” said Denis Hew, director of the APEC Policy Support Unit.
The global economy grappled with heightened policy uncertainty in 2018, as economies issued tariffs and countermeasures. Deceleration of GDP growth ensued in parallel to the announcement of trade-restricting measures in the second half of 2017, culminating in the imposition of tariffs and counter-measures in 2018.
Today, trade restrictive measures comprise nearly 60% of total trade and trade-related measures, according to the report, entitled A Delicate Balancing Act.
In contrast, for decades trade drove the expansion of the regional economy, from US$23.5 trillion in 1990 to $63.6 trillion in 2017.
The declining influence of trade on the region’s growth is pivotal for APEC.
“Sustaining economic growth amid trade tensions and policy uncertainty is a delicate balancing act. But it also presents opportunities—to pursue more structural reform that encourages growth that is sustainable and inclusive,” Hew explained.
The region faces other challenges: growing income inequality, greenhouse gas emissions and encroaching climate change, and industry-disrupting technology. APEC’s approach to economic policy cooperation, however, can help members navigate cross-border complexities and find solutions.
“APEC will need to regain the spirit of 1989—cooperative, holistic and innovative—if it is to step up to the challenges of the next 30 years,” said Rebecca Sta. Maria, executive director of the APEC Secretariat.
Photo: Image by Andy Leung