The IMF predicts that the Asia-Pacific region will grow by 4% this year and 4.3% in 2023.
Asia — especially Southeast Asia — is still a bright spot, despite the global economy likely to plunge into recession by 2023, according to recent economists.
Recently, the International Monetary Fund just released its latest outlook report titled “Asia Heads into Headwinds Amid Interest Rate Increases, War and Slowdown in China”.
According to the report, the Asian economy’s strong recovery wave was lost to three “severe headwinds” in early 2022. These are rising interest rates, tensions in Ukraine and the effects of the Chinese economy. Nevertheless, Asia remains a bright spot in the increasingly bleak global economic picture.
The IMF predicts that the Asia-Pacific region will grow by 4% this year and 4.3% in 2023. Both figures are below the 5.5% average growth rate that Asia has maintained over the past 2 decades.
However, this is still a much higher level than Europe and the US. The IMF predicts that the eurozone economy will grow by 3.1% this year and 0.5% in 2023, respectively. The figures for the US economy are 1.6% and 1% respectively.
In general, Asia’s economic development path will differ from that of many advanced economies thanks to diversity, said Taosha Wang, portfolio manager at the Fidelity fund. “Asia has ample room to pursue growth-enhancing policies, unlike many other regions where high inflation is forcing central banks to tighten financial conditions,” Wang said.
Strong recovery of Southeast Asia
According to the IMF, Southeast Asia will experience an impressive recovery in 2023.
Vietnam’s economy benefits from its position at the center of supply chain diversification, while the Philippines, Indonesia, Malaysia and India will grow between 4% and 6%.
Tourism in Cambodia and Thailand will flourish, the IMF added.
According to DBS Bank, the ASEAN-6 group’s exports (including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) have so far surpassed North Asia and the rest of Asia. Exporting countries such as Indonesia are benefiting from rising commodity prices and supply chain disruptions.
Purchasing Managers Indices (PMIs) of Indonesia, the Philippines, Thailand and Vietnam are “all above 50 points in September”. DBS experts believe this helps economies achieve higher growth rates than economies like Korea and Taiwan (China).
The bleak prospects of South Asia
Meanwhile, the outlook for frontier markets in Asia, such as Sri Lanka and Bangladesh, remains bleak, the IMF said.
Sri Lanka is still in a severe economic crisis, while in Bangladesh tensions in Ukraine and high commodity prices are making it difficult for the economy to recover from the pandemic.
“Countries with high debt ratios (such as the Maldives, Laos and Papua New Guinea) or facing refinancing risks (such as Mongolia) also face challenges amid volatile macroeconomic conditions,” the IMF said.
The IMF predicts that China’s economy may recover this year, reaching 3.2% growth before accelerating to 4.4% in 2023, provided the country gradually eases its Zero Covid policy. However, the Fidelity fund still notes that there are still many risks threatening the Chinese economy, such as the sharp depreciation of the yuan against the USD.