Increasing reliance on APEC to grow world economy

BALI -- As the engine of the global economy shifts to Asia, a greater responsibility is placed on regional groups such as the Asia-Pacific Economic Cooperation ( APEC) to drive ahead development not only for its members but for the world in general.

Such pressure demands greater integration and more cohesive trade, which can be tricky to implement for the 21 members of APEC.

The APEC region is expected to outperform the world with growth forecast to accelerate to 4.7 percent in 2013, according to an APEC policy unit report.

Industrialized APEC members have defied the global trend of moderating economic growth with GDP picking up by 2.1 percent in 2012. This is quite significant given that most industrialized economies are still struggling to avoid recession and have recorded modest growth.

Growth in emerging and developing APEC economies is expected to pick up by 6.9 percent in 2013. Despite this moderation in growth, emerging and developing APEC members remain the fastest growing economy in the world, contributing to more than 55 percent of global real GDP growth.

However, APEC's growth prospects are likely to be influenced by external forces.

In industrialized APEC, both governments and households are expected to tighten spending in order to consolidate their balance sheets. The uncertain global economy, which could translate into lower investment and export growth, could seriously jeopardize the recovery process of these economies.

The uncertain global growth outlook remains the strongest headwind for emerging and developing APEC in 2013. Economies with large and robust domestic markets and less reliance on exports as a driver of growth will be in a better position to weather the external slowdown. On the other hand, growth is expected to slow sharply among economies with relatively high exposure to the external market but with small domestic consumption bases.

The APEC region as a whole is a net oil-importer. Large and sustained increases in oil prices due to geopolitical concerns in the Middle East could also negatively impact APEC's growth by putting upward pressure on inflation and deteriorating the region' s terms of trade. But it's not all bad news.

"Economic activity in industrialized APEC economies as a whole is forecast to pick up at faster rates than non-APEC industrialized economies," the policy report insists, noting that members such as the United States, China, Australia and New Zealand have shown significant growth due to their links with APEC.

For example, more than two thirds of Australia's total trade is with fellow APEC members, says a new report published by the Department of Foreign Affairs and Trade (DFAT) of Australia. It lends credence to the fact that building closer multilateral trading bloc helps enhancing investment performance.

The report titled "The APEC Region -- Trade and Investment" is part of a series published each year by DFAT on Australia's international trade in goods and services. The latest report highlights the importance of Australia's economic relationship with APEC member economies.

With regard to Australia's trade, the DFAT report shows that APEC member economies account for almost 57 percent of Australia's investment abroad and nearly 45 percent of foreign investment in Australia.

In terms of Australian investment in APEC member economies, the report finds that investment rose 7.3 percent to $736.0 billion. On the other hand investment by APEC member economies in Australia rose 9.3 percent to $970.6 billion.