ADB sees Asia Pacific growth of 4.8% in 2023-24

0
245
Asia Pacific growth of 4.8%
Workers produce garments for export in a factory in Vietnam. ADB is projecting 4.7% GDP growth this year for Southeast Asia and 5.0% in 2024, with Vietnam growing the most at 6.5% and 6.8%, respectively. Photo from Vietnan News Agency
  • ADB expects growth in developing Asia at 4.8% this year and next, up from 4.2% last year, with China’s recovery and India’s healthy domestic demand as boosters
  • Inflation is forecast to moderate this year and next, from 4.4% in 2022 to 4.2% in 2023 and 3.3% in 2024, gradually moving closer to pre-pandemic averages
  • Southeast Asian economies should grow 4.7% this year and 5.0% in 2024 on the average. The Philippines’ GDP is seen expanding 6.0% in 2023 and 6.2% in 2024; Indonesia at 4.8% and 5.0%, and Viet Nam at 6.5% rising to 6.8%
  • ADB says immediate and emerging challenges could still stall recovery and urged policymakers to be vigilant of higher inflation, lending rates and debt. It asks leaders to keep supporting multilateralism and lean against global fracturing risks

Asia Pacific growth of 4.8% is expected this year and in 2024, improving on the region’s 4.2% economic expansion in 2022 with South Asia predicted to grow faster than other regions, the Asian Development Bank (ADB) says in a new report.

China’s reopening as it pivots away from its zero-COVID strategy is brightening the growth prospects of Asia Pacific this year, as the continued easing of pandemic restrictions boosts consumption, tourism, and investment, ADB said in its Asian Development Outlook (ADO) April 2023, released on April 4.

Southeast Asian economies are expected to grow 4.7% this year and 5.0% in 2024. Projected to lead growth are the Philippines with 6.0% GDP expansion this year and 6.2% in 2024; Indonesia at 4.8% and 5.0%, and Vietnam at 6.5% and 6.8%, the report said.

In July 2022, ADB revised up its Philippine growth forecast to 6.5% in 2022 for easing its COVID restrictions and trimmed its outlook for developing Asia to 4.6%, factoring in the effects of China’s pandemic lockdowns, the West’s money tightening and the Ukraine war.

Economies in the Caucasus and Central Asia can also expect steady growth, with expansion in the sub-region forecast to be 4.4% this year and 4.6% in 2024.

“Prospects for economies in Asia and the Pacific are brighter, and they’re poised for a strong recovery as we return to normalization following the pandemic,” said ADB chief economist Albert Park.

“People are starting to travel again for leisure and work, and economic activities are gathering pace. Because many challenges remain, governments in the region need to stay focused on policies that support stronger cooperation and integration to promote trade, investment, productivity, and resilience.”

With the lifting of the zero-COVID strategy in December last year, China’s economy is expected to grow 5.0% this year and 4.5% in 2024, compared with 3.0% growth in 2022. India, meanwhile, is forecast to expand by 6.4% this year and 6.7% next year, due to healthy domestic demand.

Continued reopening and tourism recovery are supporting growth in the Pacific, with expansion likely to reach 3.3% this year before moderating to 2.8% in 2024.

Regional inflation will slow to 4.2% in 2023 and 3.3% in 2024 after reaching 4.4% last year, ADB said. Fading supply chain pressures, tighter monetary conditions, and declining though still elevated commodity prices are expected to shape developing Asia’s inflation outlook.

“Before China left zero Covid policy behind, our forecast for growth in China this year was 4.3%. But we’ve upgraded that in this announcement to 5%,” Park said.

“If the Chinese consumer comes back, that’s going to be very good for the region. China, obviously, is a source of final demand for many goods produced in the region,” he noted.

ADB warned of immediate and emerging challenges that could hold back recovery in Asia Pacific. “The recent banking turmoil in Europe and the United States is an indication that financial stability risks have heightened. Policy makers should stay vigilant in the post-pandemic environment of higher interest rates and debt,” the bank said in its report.

The report said improved consumption and investment are boosting recovery in many regional economies, offsetting the impacts of elevated food and energy prices caused by the Russian invasion of Ukraine and other global headwinds.

ADB cited the rising trend in tourism and remittances as pandemic restrictions ease further. In many tourism-dependent economies, visitor arrivals are steadily improving toward pre-pandemic levels.

The bank said, however, risks to the outlook persist with a protracted or escalated Russian war on Ukraine possibly stoking renewed spikes in commodity prices and global inflation and inducing further monetary tightening.

Tighter global financial conditions, combined with the increase in debt over the past decade and during the pandemic, have elevated financial stability risks, as evidenced by the recent banking sector turmoil in the USand Europe. These risks must be carefully monitored and proactively addressed, ADO April 2023 said.