SINGAPORE, 16 September 2006 — The International Monetary Fund (IMF) has raised its 2006 economic forecast for East Asia excluding Japan. The Fund predicts that the region will expand by 8.3 percent in 2006, a 0.4 percent increase from its April 19 forecast of 7.9 percent. The IMF’s chief economist, Raghuram Rajan described East Asia as “The Most Dynamic Region.”
The dynamism of East Asia’s growth has been linked to the growth of Asia’s traditional giants, China and India. China, long described as the world’s manufacturing center, was forecast to grow its economy by 10 percent in 2006 and 2007. India, which has predicted to take on most of the world’s outsourcing, is predicted to grow its economy by 8.3 percent in 2006 and by 7.3 percent in 2007.
While the Fund acknowledged that the US would remain the final destination for most of the regions goods exports and that the region would still be affected to a considerable degree by business cycle fluctuations in the US and Japan, the impact of the growing Asian giants of China and India would become more prominent.
For Saudi Arabia and its “Look East” policy, the rise of China, India and the East Asian region outside Japan is particularly significant in terms of its trade. The Kingdome’s interest in developing trade relations with East Asia could clearly be seen through the fact that Custodian of the Two Holy Mosques King Abdullah made his first overseas trips upon assuming the throne to China and India.
East Asia, it seems, is where the growth is but as like other regions, the Fund warned that the region faced several risk towards maintaining the growth rates.
Amongst those risk was: The tightening of monetary supply to curb inflation and the high price of oil (The Fund predicted that oil prices would increase by 20 percent in 2007 to $75.5 a barrel.)
As the steward of a quarter of the world’s energy supplies, Saudi Arabia has the potential to ensure that East Asian economies continue to grow at the rates that it has enjoyed during the past few years and has been busy in developing friendly ties with East Asia. Not only did King Abdullah visit China, India, Pakistan and Malaysia on his first overseas trip as King, Crown Prince Sultan made his first overseas journeys to Japan, Singapore and Pakistan.
As Dr. Ibrahim Mishari of Saudi Aramco said at the Institute of South East Asian Studies on the sidelines of Singapore’s annual APPEC conference, “Asia and the Pacific is the number one growth area for our business.”
