Many may think that the United States or Europe, as the location of most of the world’s most developed nations, would be driving global economic growth. Asia, however, is actually the area driving global economic growth this year, according to the International Monetary Fund (IMF).
Although a lagging Chinese economy slowed economies around the world—and Asia in particular—the Asian economies are still powering most of the world’s growth. "Asia is impacted by the still weak global recovery, and by the ongoing and necessary rebalancing in China," Changyong Rhee, Director of the Asia-Pacific Department at the IMF, said in a statement. "But domestic demand has remained remarkably resilient throughout most of the region, supported by rising real incomes, especially in commodity importers, and supportive macroeconomic policies in many countries."
The IMF predicts that the Asia-Pacific region will grow at a fairly impressive 5.3% this year. That growth accounts for almost two-thirds of global growth. Unfortunately, that still represents a slight downturn in overall global economic growth, down from 5.4% in 2015.
Although most of the news from China has looked bad, the IMF predicts that India will pick up some of the slack, remaining the world's fastest-growing large economy (targeting 7.5% growth this year and next).
Vietnam will also be a strong performer in 2016, becoming one of the region’s quickest growing economies. Similarly, positive predictions exist for the Philippines and Malaysia. Vietnam is projected to grow at 6.3% this year, Malaysia will grow at 4.4%, and the Philippines will expand by 6.0% this year.
Despite their strong growth, the IMF fears the region has a strong potential downside risk. This could flow from slowing growth in developing markets, causing weaker than normal global trade, lower than usual commodity prices, and high domestic debt in many of these Asian countries.
Some of these downsides, however, could actually become benefits if approached correctly. "Low commodity prices could be a bigger boost to the region's economies than expected; and regional and multilateral trade agreements, such as the Trans-Pacific Partnership, could benefit Asia-Pacific even before they are ratified," the IMF said.
Despite the overall positive outlook for the Asia-Pacific region, the outlook for individual countries varied widely. China is still realigning its economy, Japan is expected to experience a significant economic slowdown, and many other nations have moderate growth or loss predictions. Nevertheless, as a group, the outlook is still positive for the region and for the global economy as a whole.