How pandemic-era shocks have changed Asia’s outlook
Once pent-up demand from post-lockdown fades, we think that Asian economies will settle at lower GDP growth and higher inflation than our pre-pandemic forecasts. This means nominal interest rates are also likely to stay high in 2023-2024.
What you will learn:
- Our view is based on the impact of several economic shocks during the pandemic on both the demand and supply side. Separating each shock is key to explaining why we now expect lower growth, higher inflation, and higher interest rates than we thought pre-pandemic.
- We estimate the hit to Asia’s real GDP equates to a 0.6ppts reduction in medium-term growth compared to our pre-pandemic baseline. Our revised growth profile also covers the effect of higher interest rates.
- Inflation is trickier to disaggregate. Our forecast for Asia’s medium-term inflation is now 0.25ppts higher than our pre-pandemic baseline. Based on our estimates, external supply shocks mostly explain the upward revision to our inflation forecasts.
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