Decline in Oil Prices to Lead to Greater Tensions Over Trans-Pacific Imbalances Says New PECC Report



    VANCOUVER, April 17 /CNW/ - Economic growth in the Asia Pacific is set to
slow in 2007 to a still healthy 4.3 per cent across the region, compared to
5.0 per cent in 2006 before a moderate rise in 2008 to 4.5 per cent. East Asia
will lead the way with growth at 5.7 per cent, pulling up the rest of region,
which is forecast to grow by only 2.6 per cent this year.
    However, the forecast from the Pacific Economic Cooperation Council
(PECC) warns that the decline in the oil imports component of the US trade
deficit will focus attention back on trans-Pacific imbalance. Dr. Charles
Morrison, Chair of PECC and President of the US-based East West Center says,
"Although the current account deficit seems to be peaking as a percentage of
total GDP, this being an election cycle, we are likely to hear more rhetoric
from Washington, DC, calling for actions to reduce the US import bill."
According to the PECC forecast, based on the views of the panel of economic
analysts, the US current account deficit will shrink from 6.2 per cent of GDP
in 2006 to 5.6 per cent this year.
    China continues to drive Asian growth, with expansion in real GDP
expected to top 10 per cent through 2008. China's economy will be powered
again by fixed asset investment, but the contribution of personal consumption
to overall GDP growth is expected to be increasingly important, as disposable
incomes of Chinese households continue to rise. On the external front, China's
current account surplus will continue to rise, to US$315 billion in 2007 and
US$364 billion in 2008. PECC forecasts the renminbi to appreciate to
US$1:RMB7.3 in 2008 from US$1:RMB8.0 last year, well below the demands of some
US lawmakers.
    The Japanese economy is expected to slow to around 1.9 per cent real GDP
growth in 2007 before rebounding to 2.5 per cent in 2008. The slowdown in 2007
will be due mostly to weaker production, reduced private demand, and an
increasing fiscal burden. CPI inflation is expected to rise by 0.6 per cent in
2007 and 2008 and the GDP deflator will return to positive territory this
year, likely marking the end of a long deflationary period in the Japanese
economy.
    Yuen Pau Woo, President and Co-CEO of the Asia Pacific Foundation of
Canada and Coordinator of the State of the Region report says, "Strong growth
in East Asia will offset the anticipated slowdown in the US. However, the Asia
Pacific region continues to be highly interdependent, and we should not expect
any economic decoupling of East Asia from the rest of the region."
    Canada's real GDP growth is expected to dip slightly to 2.3 per cent in
2007 before improving to 2.9 per cent in 2008. CPI inflation will be modest,
not exceeding 2.0 per cent through 2008. Real export growth will improve in
2007-2008 compared to 2006, but real import growth will be slightly higher,
such that the Current Account surplus will be in a declining trend through
2008. The Canadian dollar is also expected to decline against the US dollar
over the same period.
    PECC's economic outlook update is a component of its annual State of the
Region report, due for release in September, covers developments across the
Asia Pacific region.
    The full quarterly update is available at:
    www.pecc.org/sotr/2007-q1-update.pdf

    About Pacific Economic Cooperation Council
    The Pacific Economic Cooperation Council (PECC) is an independent
non-government international organization committed to the promotion of
cooperation and dialogue in the Asia Pacific. Founded in 1980, PECC is a
network of member committees composed of individuals and institutions
dedicated to this mission. The Council is one of the three official observers
of the APEC process.

    About APF Canada
    The Asia Pacific Foundation is Canada's leading independent resource on
contemporary Asia and Canada-Asia relations. As a national non-profit
organization established by an Act of the Federal Parliament in 1984, the
Foundation brings together people and knowledge to provide the most current
and comprehensive research, analysis and information on Asia and on Canada's
transpacific relations. It promotes dialogue on economic, security, political
and social issues, helping to influence public policy and foster informed
decision-making in the Canadian public, private and non-governmental sectors.
The Foundation is funded principally through an endowment from the Government
of Canada and a grant from the Province of British Columbia.





For further information:

For further information: Melina Czerwinski, Communications Assistant,
Asia Pacific Foundation of Canada, Phone: (604) 630-1540, Fax: (604) 681-1370,
Email: melina.czerwinski@asiapacific.ca

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ASIA PACIFIC FOUNDATION OF CANADA

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