Asian economic ministers on Saturday predicted a slowdown in regional economic growth this year amid the European debt crises and planned spending cuts in the United States. The ministers said the developing economies of the 10-state Association of Southeast Asian Nations (Asean) grew at a collective 7.5 percent in 2010, but predicted this could slip to below six percent this year.
"The ministers noted that there are continuing challenges and downside risks including the sovereign debt crisis and fiscal problems in some developed markets, rising food and commodity prices, (and) continued financial market stresses," the ministers said in a statement after a meeting in Indonesia. "The ministers agreed that Asean should remain vigilant in the face of these risks."
Economic growth in the Asean economies would be between 5.7 percent and 6.4 percent in 2011, with intra-regional trade and investment helping to offset weakness in the developed economies.
Indonesian Trade Minister Mari Pangestu said Southeast Asia was well-placed to deal with the global economic uncertainty, which she predicted could continue for years to come. "The ministers understand that in the coming months, in one or two years ahead, the uncertainties will continue, that the world economic situation will continue to be challenging," she told reporters.
Underlining the region's new resilience to external economic shocks, the ministers said trade between the Asean countries grew 32.9 percent to $2.04 trillion last year, after a 19-percent decline in 2009. Foreign direct investment in the Asean bloc has grown at an average of 19 percent a year for the past decade, and last year reached $75.8 billion, slightly more than its pre-crisis peak in 2007.
Asean groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Economic ministers and senior officials from Asean's partners including Australia, China, India, Japan, South Korea and the United Sates also took part in the meetings in Manado, on the island of Sulawesi, over the past three days.
The discussions took place against a backdrop of global market turmoil driven by fears about European indebtedness and a US credit rating downgrade. Markets swung wildly this week on rumours of a French credit downgrade over the debt crisis, which started in Greece and is now fuelled by fears Spain or Italy might default, potentially sparking a break up of the 17-nation currency.
Investors are questioning whether France and Germany, the eurozone's two largest economies, can continue to underwrite other states' debts without losing their top credit ratings and falling victim to the crisis themselves. In Asia, there are concerns about the health of China's banking system and the politically-sensitive inflation figure, which hit a more than three-year high of 6.5 percent in July.
But Pangestu told reporters in Manado on Friday that Asia was ready to "offset the decline" in the US and European economies. The Asean ministers called for the bloc of around 600 million people to "harness its competitive strength through deeper integration" of its disparate economies. Initiatives to cut obstacles to the movement of goods and services in the region should be implemented in a "timely manner", in line with Asean's plans to create a harmonised economic community by 2015.
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