Easing supply hurdles won’t offset falling industrial demand in APAC
We earlier argued that Asia’s manufacturing activity has been impacted more by demand than by supply-side pressures, due to strict Covid-related policies. Supply constraints in Asia have been less acute than in the US and Europe, and we had forecast resilient industrial growth in 2022 and 2023 as regional demand recovers. But the global growth outlook has deteriorated since then. Following our recent downgrade to 2023 GDP growth forecasts for most Asian economies, we now expect weaker industrial growth in Asia. That said, there will be divergences across the region.
What you will learn:
- We expect industrial growth in Asia ex-China to slow to 1.3% in 2023 from 3.8% in 2022, as weak demand weighs on output, despite easing supply chain pressures.
- Falling input costs and improving supply prospects are good news, especially for those industries hit hard by shortages, such as the automotive sector. But we continue to think that demand prospects hold the key to Asia’s industrial outlook. And the trends are already discouraging, especially for the more export-oriented manufacturers in North Asia.
- We think China’s GDP growth will not be fast enough in 2023 to offset the fall in demand for Asia’s goods from the recession-bound advanced economies. The anticipated rotation away from goods to services demand and signs of oversupply in the semiconductor industry are further drags on the external demand outlook.
The long-term outlook for Northern African cities
North African cities are forecast to experience some of the fastest rates of employment and population growth over the long term. GDP growth is also forecast to be near the top of the global pack, just trailing behind sub-Saharan Africa.Find Out More
The long-term outlook for Middle Eastern cities
Middle Eastern cities are forecast to experience some of the fastest rates of employment and population growth over the long term. However, GDP growth is forecast to be middle of the global pack.Find Out More
Acceleration in digitalisation will keep a service trade deficit in Japan
We project Japan's services trade balance will remain in deficit over the coming years as a trend increase in the import of digital-related services will outweigh a rising travel services surplus that has been driven by inbound tourists.Find Out More