Asia Economic Trends

The developing economies of Asia are showing a vigorous recovery, characterized by an increase in private consumption and a rebound in investments and services, with particular emphasis on tourism. This recovery is a result of the easing of the pandemic's impact. Despite reduced demand from advanced economies, restrictive monetary policies, and the Russian invasion of Ukraine, these economies demonstrated significant resilience last year.

China's reopening is positively affecting both the region and the global economy. Regional growth is projected to reach 4.8 per cent this and next year, with South Asia forecasted to experience faster growth than other regions. East Asia and Southeast Asia are benefitting from increased domestic demand, while the Pacific region is experiencing growth due to the return of tourists. General inflation is gradually returning to pre-pandemic levels, with a forecast of 4.2 per cent for this year and 3.3 per cent in 2024 for developing Asia. However, central banks should closely monitor inflationary pressures, which remain widespread and elevated in various economies in the region.

CHINA

Following China's reopening, institutions have positively revised their forecasts for the Chinese economy. In the April 2023 report "World Economic Outlook," the International Monetary Fund (IMF) predicts a GDP growth rate of 5.2 per cent for China in 2023. The report states, "to help the recovery, monetary and fiscal support, along with accelerated structural reforms, will be necessary. The Chinese economy is poised to recover this year, with mobility and activity resuming after the lifting of pandemic-related restrictions, giving a boost to the global economy. According to our latest projections, the economy will expand by 5.2 per cent this year, compared to 3 per cent last year."

The Asian Development Bank, in its April 2023 update, forecasts a 5 per cent GDP growth rate, stating that "the reopening of the People's Republic of China will influence the prospects of developing Asia this year. The PRC expects growth to rebound to 5 per cent this year. The recovery is robust in service sectors, including hospitality, leisure, and transportation. Suppressed demand is expected to support consumption this year. The reopening of the PRC will also stimulate regional growth through trade, regional value chains, and tourist linkages."

The Economist Intelligence Unit, in its latest "China Country Report," predicts a real GDP growth rate of up to 5.7 per cent. "China's economic prospects have brightened after a temporary pause associated with the country's 'zero Covid' policy. Real GDP growth will accelerate to 5.7 per cent in 2023, compared to 3 per cent in 2022, driven primarily by a recovery in private consumption. The new administration inaugurated in March will reassure private and foreign businesses through business-friendly policies."

Fitch Ratings has modified its GDP growth rate forecast to 5 per cent from February 2023. "Fitch Ratings has revised its economic growth forecast for China in 2023 to 5 per cent, up from the previous 4.1 per cent, reflecting evidence that consumption and activity are rebounding more quickly than initially expected."

In 2022, China's Gross Domestic Product (GDP) reached 121 trillion yuan, with a 3 per cent increase from the previous year, according to data from the National Bureau of Statistics (NBS). Among all 31 provinces, autonomous regions, and municipalities in mainland China, 16 provinces reported above-average national growth, and eight provinces surpassed a GDP of 5 trillion yuan. Guangdong (12.9 trillion yuan), Jiangsu (12.2 trillion yuan), and Shandong (8.7 trillion yuan) were the leading provinces in terms of total GDP value in 2022, while in terms of GDP growth rate in the same year, the provinces with the fastest growth were Fujian (4.7 per cent), Jiangxi (4.7 per cent), and Hunan (4.5 per cent).

INDIA

Supported by consumer spending and investments, the economy experienced solid growth during the fiscal year 2022, albeit at a slightly slower pace than the previous year. The increase in food and energy costs caused inflation to accelerate above the central bank's target. Growth is expected to moderate slightly during this year and strengthen next year, once again supported by consumer spending and investments due to the improvement in the global economy. Inflation will follow a downward trend as global price pressures ease. It is essential to develop a comprehensive package of policies to support investments in the infrastructure necessary to promote the country's economic development.

INDONESIA

Economic growth significantly increased during 2022. Export activities notably increased, contributing to economic growth and generating extraordinary fiscal revenues. Higher commodity prices impacted inflation, although to a lesser extent than anticipated, but still enough to slow down consumption and investments and necessitate a tighter monetary policy. There was a decrease in foreign debt inflows, a reduction in foreign reserves, and a weakening of the national currency. For 2023, slower global growth is forecasted, which will have an impact on exports and economic growth. In the medium term, repairing the negative effects caused by the recession will be a challenging task.

MALAYSIA

Growth exceeded expectations in 2022, supported by strong domestic demand and a recovery in services following the reopening of borders and the normalization of economic activity. Inflation remained generally contained, restrained by government subsidies and price controls. A less accommodative monetary policy stance was adopted in response to the increase in global interest rates. Growth is expected to moderate, and inflation is expected to decelerate in 2023 and 2024, primarily in line with changes in the global context. Malaysia should promote gender-inclusive policies to stimulate women's participation in the labor market.

SINGAPORE

The growth of Gross Domestic Product (GDP) moderated during 2022 as expansion in all sectors experienced moderation, and contributions from net exports and investments recorded a significant decline. Inflation accelerated due to price increases in the food and energy sectors. Growth is expected to continue moderating this year due to weak external demand, but improvement is forecasted for 2024. Inflation will follow a downward trend until the forecast horizon, thanks to the lagged effect of restrictive monetary policies. It is essential to develop a comprehensive package of fiscal policies to support a transition to a low-carbon economy while preserving competitiveness.

VIETNAM

Economic recovery showed significant momentum during 2022, supported by robust export performance, solid foreign direct investments, and the recovery of domestic consumption. However, the pandemic has highlighted structural issues that represent one of the main economic threats. Forecasts indicate moderate growth in the next two years, while inflation is expected to rise. A particularly relevant challenge lies in managing accumulated problems in the financial sector, including the expansion of non-performing loans.

THAILAND

During 2022, Thailand's economy continued to register robust expansion, thanks to robust private consumption and progress in the tourism sector. For the period 2023-2024, tourism and private consumption are expected to continue as the main drivers of growth. However, it is essential to consider the risk of a possible global economic slowdown that could divert Thailand's economy from its recovery trajectory. Furthermore, the transition to a net-zero emission economy presents a politically challenging challenge, given the economy's high vulnerability to the consequences of global climate change.