The United Nations Economic and Social Commission for Asia and the Pacific (Unescap) has termed exchange rate management as the biggest challenge for the region in 2007. However, the regional economies are expected to surge ahead despite risks in the year, said the Unescap's Economic and Social Survey of Asia and the Pacific 2007 launched here on Wednesday.
According to the survey report titled, "Surging Ahead in Uncertain Times", the region is becoming the locomotive of global growth. Developing economies in the Asia-Pacific region accounted for 16 percent of global output and one-third of world economic growth in 2006. However, the gender discrimination is estimated to cost the region almost $80 billion per year.
The survey forecasts the external environment in Asia-Pacific to be less favourable in 2007, mainly due to the slowing of the US economy and a moderate decline in global electronics demand, but sees continued dynamism despite risks of further oil price shocks, and a sharp depreciation of the US dollar. As a whole, the 2007 outlook is above 7 percent economic growth.
The three big Asian economies-China, India, and Japan will maintain the growth momentum and may provide good opportunities to other developing countries. According to the survey, developing economies in the Asia-Pacific region are expected to grow at an impressive 7.4 percent in 2007, though down from 7.9 percent in 2006.
In a special study on the cost of gender discrimination to the region's economies, the survey estimates that the region is losing $42-47 billion a year due to restrictions on women's access to employment, and another $16-30 billion a year because of gender gaps in education.
The region's central banks can choose any two of three policy options: targeting exchange rates, having an independent monetary policy, or keeping capital accounts open. However, at the same time, the survey warns that interventions by monetary authorities to keep currencies down are leading to inflated asset values, especially in housing and equity markets.
The survey says that as the international economic environment weakens, momentum in the region is expected to come from China, India and Japan. A rebound in growth in South-East Asian economies will add to the region's growth momentum. It projects inflation in 2007 at 3.8% in developing Asia-Pacific economies.
Downside Risks in 2007: Oil price shock, an abrupt cooling of housing markets in the United States, a disorderly unwinding of global imbalances, a reversal of the Japanese economic recovery, economic overheating in China, and an avian flu pandemic are seen as six major downside risks to baseline forecast for 2007.
Ten years after the Asian financial crisis, all of the countries affected, except for Malaysia, displayed renewed economic vulnerability at the end of 2006. Vulnerability is also a concern in some of the region's other emerging economies, such as Pakistan and the Russian Federation.
Failure to allow women to realise their economic potential in the workplace has led to gaps of between 30 and 40 percent in male-female labour force participation rates across the region.
The survey also contains a review of the region's economic performance in 2006; an evaluation of sub-regional performance, challenges and policies; and a discussion of five key policy issues on its watch list: monitoring vulnerability to currency crisis; boosting domestic demand through private investment, especially in East Asia; reaping the one-off demographic dividend; managing urban growth; and promoting green growth to sustain development.