The growth of the Asia-Pacific (APAC) regional economy is set to slow down more than it was previously estimated due to China’s zero-COVID policy, the perils of the Ukraine war and tight monetary conditions. As a result, GlobalData, a leading data and analytics company, has revised down its 2022 growth forecast for the region from 4.7% in February to 3.9% in June.
According to GlobalData’s June 2022 forecast, India (6.8%) will be the fastest growing economy in the APAC region, followed by the Philippines (6.7%) Malaysia (6.5%) and Indonesia (5.3%) in 2022.
Puja Tiwari, Economic Research Analyst at GlobalData, comments: “Government’s policies to enhance logistics infrastructure, incentives to facilitate industrial production, as well as measures to improve farmers’ income are expected to support India’s economic growth.”
On the other hand, Thailand, Taiwan, South Korea, and Japan’s economies are set to witness a slow growth rate of 3.4%, 3.3%, 2.7% and 1.7%, respectively, in 2022, due to depreciation in national currencies against the dollar, which has been exacerbated by the US Federal Reserve’s (Fed) rate hike and rising inflationary pressures.
Major APAC economies, including China, Japan, India, and Indonesia, are experiencing depreciation in their local currencies since the Fed increased its key interest rate by 75 basis points on 15 June 2022.
In addition, China’s economy has been battered by its zero-COVID policy and floods in some regions, which have affected manufacturing output.
Tiwari continues: “GlobalData forecasts China’s economic growth rate to slow down, from 7.8% in 2021 to 4.1% in 2022. Since other economies in APAC are closely intertwined with China through trade, a slowdown in China is expected to impact the regional economic growth prospects.”
The demand supply imbalance created by the Ukraine crisis and raw material shortage from China resulted in a high price level of the final goods and services in the region. Consequently, GlobalData has revised the 2022 inflation rate forecast for the region from 3.2% in February 2022 to 5.2% in June 2022.
India is forecast to witness the highest inflation rate of 6.5% in 2022 in the region, followed by Australia (5.1%), Singapore (5%) and Thailand (4.4%), whereas Taiwan (2.8%), Malaysia (2.6%), China (2.2%) and Japan (1.9%) would witness the slowest inflation rate.
However, the APAC region is still expected to be the fastest growing among all other regions in 2022. The Regional Comprehensive Economic Partnership (RCEP), effective from 1 January 2022, covering the ASEAN countries along with Australia, China, Japan, and New Zealand, is expected to boost the trade scenario in the region. Along with this, robust domestic demand following the lifting of COVID-19 restrictions in larger economies including China, India, and Japan will play a pivotal role in driving the economic growth of the region in 2022.
Tiwari concludes: “Severe heatwaves and rising domestic prices in India, devastating floods in China, high debt levels and political crisis in Sri Lanka and Pakistan’s fragile economies, along with depreciating currency in major economies, are making the region vulnerable. Major economic reforms continue to be the need of the hour for sustainable economic recovery across the APAC region.”
