(CPV) - Asia-Pacific growth in 2012 is exposed to two major external risks: a disorderly sovereign debt default in Europe and a surge in oil prices. These could lead to cutbacks in regional growth and trade, causing a setback to poverty reduction.
The ESCAP Economic and Social Survey for Asia and the Pacific 2012 estimates a euro zone default could cut Asia-Pacific exports by 390 billion USD during 2012-2013. Least Developed and Landlocked Developing Countries would be most affected as these depend heavily on markets in the developed economies for their exports which could shrink by 10 percent.
Reduced exports would slash developing Asia-Pacific growth by up to 1.3 percentage points in 2012, hampering poverty reduction in the region to such an extent that, by 2013, 14.3 million fewer people would be able to escape poverty based on the $1.25-a-day poverty line, and 22.2 million at the $2-a-day poverty line.
This could delay by one year, the achievement of the first Millennium Development Goal (MDG) to halve extreme poverty and hunger by 2015 in many Asia-Pacific countries, in particular, Bhutan, India, Nepal and Uzbekistan.
Another threat is from a sharp and sustained increase in the price of oil due to non-economic factors, such as political instability in major oil-producing countries.
Inflation is a major concern in emerging Asia-Pacific economies and ESCAP estimates that a $25 increase in already high oil prices, for an extended period, would push up inflation by at least 1.3 percentage points in the developing economies in the region.
As seen in past years, higher energy prices push up agricultural production costs and food prices, affecting the poor the most. National current account and fiscal balances would deteriorate, as most economies in the region are net importers with extensive fuel price subsidies in several countries.
An increase of about $25 in diesel and gasoline prices would and $15 billion to the Asia-Pacific fuel price subsidy bill over the 2010 estimate. An increase in the fuel subsidy in sub-regions such as South and South-West Asia would reduce the availability of funds for state health care and education budgets.
An additional risk to Asia-Pacific economic dynamism this year is from likely measures to revive growth in developed economies, in particular, liquidity injections. This will expose developing Asia-Pacific economies to risk of asset market bubbles, exchange rate appreciation and inflationary pressures.
A growing concern for developing Asia-Pacific countries is the recent emergence of trade restrictions in developed countries which could lead to trade conflicts. The ESCAP Survey highlights the need for a successful outcome to the Doha development round talks at the World Trade Organization to promote freer global trade./.