The Asia-Pacific economy has been hampered by multiple headwinds this year, notably slowing global growth, the Russia-Ukraine conflict, and aggressive US interest rate hikes.
However, heading into the new year, the region is poised to move on the road to recovery, as robust domestic demand is expected to offset the global economic downturn, along with the benefits of regional free trade agreements.
OASIS OF GLOBAL GROWTH
Citing a worsening global outlook, the Asian Development Bank (ADB) has lowered its economic growth forecasts for developing countries in Asia and the Pacific.
The ADB expected the region’s economy to grow 4.2 percent this year and 4.6 percent next year, below its previous forecast in September of 4.3 percent and 4.9 percent. respectively.
Even with the downgraded forecasts, developing countries in Asia will still outperform other regions of the world in terms of growth, he said.
The Asia-Pacific economy has been advancing for the past three years as the region has been struggling to combat the COVID-19 pandemic.
However, the region’s economy, which gradually recovered since the gradual relaxation of COVID-19 control measures, has stood the test of multiple challenges in 2022, including higher inflation, capital outflows, and currency devaluation. currency, among others.
“Regional inflation, which has risen further in the second half of 2022, may already have peaked in many economies,” the ADB said, pointing to data that headline inflation in developing Asia it reached 5.6 percent in September, compared to 3.0 percent at the beginning of the year. year, then decreased to 5.2 percent in October.
In response, central banks have continued to raise policy rates to control inflation, thus tightening financial conditions, which have been heavily influenced by aggressive rate hikes in the United States.
For the main advanced economies in 2023, it will be a great challenge to avoid a sharp slowdown in the pace of growth, with more restrictive monetary and financial conditions weighing on economic activity in the United States and the euro area.
The potential slowdown will have a negative impact on the Asia-Pacific region, but on the upside, mobility from easing pandemic conditions and containment measures will support domestic demand in most developing Asia .
Earlier this year, the free-trade Regional Comprehensive Economic Partnership (RCEP) mega-deal, comprising 15 Asia-Pacific countries, entered into force to boost regional economic recovery.
The fruits of free trade agreements will be another driving force for regional and global economic recovery, Lawrence Loh, director of the Center for Governance and Sustainability at the National University of Singapore, said in an interview with Xinhua.
“Asia and the Pacific will continue to recover, but worsening global conditions mean momentum in the region is losing steam as we head into the new year,” said ADB chief economist Albert Park.
CALL FOR A TRUE MULTILATERALISM
Statistics show that from January to August this year, trade between China and the other 14 RCEP members reached 1.19 trillion US dollars, or 30.5 percent of China’s total foreign trade.
In addition, the China-proposed Belt and Road Initiative (BRI), a well-received international public good and an important platform for building a community with a shared future for mankind, has made progress this year. As of the end of August this year, China’s cumulative volume of trade in goods with countries along the Belt and Road reached about 12 trillion US dollars.
Observers say China’s proposed initiatives, including the BRI, the Global Development Initiative and the Global Security Initiative, support true multilateralism, characterized by upholding the international system with the United Nations at its center and seeking win-win solutions. for all. issues of common interest.
“China remains a staunch supporter of the world economy and a key contributor to promoting world peace, security, stability, common development and prosperity,” Thong Mengdavid, a researcher at the China-based Asian Vision Institute, told Xinhua. Phnom Penh.
China is a reliable partner in terms of regional and global trade through stronger partnerships, open and inclusive development and its win-win cooperative stance with other countries, he said.
Loh said that multilateralism is key to better global governance: “Key decisions that affect the world must be determined inclusively by all countries, whether large or small.”
Earlier this month, global criticism of US trade policies made headlines, with members of the World Trade Organization (WTO) lashing out at the United States at the 15th Review of the country’s trade policy.
The European Union (EU), Canada, Turkey, and many other WTO members strongly urged the United States to honor its obligations as a WTO member and avoid unilateralism and protectionism.
Expressing concern about the US Inflation Reduction Act (IRA), signed in August to provide a record $369 billion for climate and energy provisions, some members of the The WTO complained that many of the generous subsidies in the law tip the playing field in favor of US producers. in crucial technology sectors, including the automotive sector.
“Korean EV manufacturers such as Hyundai and Kia saw their US sales drop by 30 percent after the IRA went into effect. A bigger problem is that the US move came just after Korean chipmakers including Samsung and SK promised multi-billion dollar investment plans in the United States,” the Korea Times said in an editorial.
Jeon Byeong-seo, director of South Korea’s China Economic and Financial Research Institute, told Xinhua that the US move is against WTO rules and fair competition.
As for the spillover effects of the aggressive US rate hikes on South Korea, he said it shocked the South Korean financial market and its real economy at the same time.
CONFIDENCE IN THE CHINESE ECONOMY
China has tightened its macro control this year to cope with the impact of “factors beyond expectations” and has maintained overall economic and social stability, according to the tone-setting annual Central Economic Work Conference held recently.
Acknowledging the presence of internal pressure and external volatility, policymakers at the meeting said they anticipate a general improvement in the country’s economic performance next year, citing strong resilience, potential and dynamism in the economy and support from favorable policies. to growth.
In the first 11 months of this year, fixed asset investment in the high-tech sector rose 19.9% year-on-year, while high-tech manufacturing value-added rose 8%, up 4.2 percentage points. than the total of the previous industrial companies. the designated size.
In the first 10 months of this year, foreign direct investment (FDI) into the Chinese mainland in actual use rose 14.4 percent on-year to 1.09 trillion yuan. The high-tech manufacturing sector posted much stronger growth, with FDI inflows rising 57.2% year-on-year in the period.
China’s foreign trade in goods also recorded steady expansion. In the January-November period, the country’s foreign trade in goods grew 8.6 percent on-year to 38.34 trillion yuan.
Speaking to Xinhua in an interview, the ADB experts said that in the face of external risks, “We see that China has taken strong fiscal and monetary policy measures to revive growth and economic activity, including through additional spending on infrastructure, adjustments in bank loan rates, and measures to deal with the recession in the real estate markets. These are all steps in the right direction and should continue in the future.”
“We also see that there is significant room for a recovery in demand for homes in China. Given the size of the Chinese economy, neighboring economies would benefit from such an increase in demand and from a broader economic recovery supported by China’s sound fiscal and monetary policy measures,” they said.
They went on to say that should international travel resume next year, regional tourism could become an even bigger growth driver when Chinese tourists start traveling again.