Growth in Asia is predicted to remain resilient over the next 18 months supported by strong economic momentum in China, said Allianz's Chief Economist Dr Michael Heise in a recent media roundtable in Singapore.
Dr Heise said both global and Asia trade have recovered from a three-year slump starting from 2014, with Allianz forecasting Asia (ex-Japan) growth of 6% and 5.7% in 2017 and 2018 respectively.
However, a caveat lies in the huge buildup 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.
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.