Unprecedented mix of challenges hurts APAC’s 2023 outlook
Asian economies are no strangers to economic setbacks. Over the last 25 years there have been three significant shocks: the Asian Financial Crisis (AFC) of 1997-1998, the bursting of the Dotcom Bubble in 2001, and the Global Financial Crisis (GFC) in 2008. Asian economies bounced back smartly each time. Even as structural scars remained, growth returned quite quickly and was sustained. However, this time is likely to be different.
What you will learn:
- Asia economies face an unprecedented combination of headwinds, including a global growth slowdown, China posting a lower growth rate than we have seen since reforms started over 40 years ago, the Fed raising rates and effectively forcing Asian central banks to follow, and higher oil prices.
- Looking to 2023, we think external environment will weigh heavily on the export-focussed region. Consumption demand is likely to be hampered by a need to rebuild savings. Investment will take time to improve. Governments have limited fiscal space to counter a renewed downturn.
- We forecast continued US dollar strength, meaning Asian currencies will remain weak. Pressure on currencies and supply-led domestic inflationary pressures will likely result in policy rates remaining high across the region.
APAC: Policymakers’ inflation worries should soon start to subside
Inflation in Asia over the past year has by and large been a story of external supply shocks, rather than excess demand. And with those external forces now easing, so too are we seeing inflationary pressures start to recede. We think inflation will drop much further over the first half of this year, giving policymakers the space to stop raising rates.Find Out More
Untangling financial conditions in the ASEAN-5
Financial conditions have deteriorated across ASEAN-5 economies to varying degrees. As well as monetary tightening, a broad depreciation of currencies and rising long-term rates are weighing on financial conditions generally across the region.Find Out More
UNRAVEL: How will the Asian economy fare in 2023?
Sung Eun Jung, Senior Economist at Oxford Economics discusses the economic prospects for Asia in 2023 with UNRAVEL.Find Out More