Asia could be a bright spot amid global downturn in 2023
Asia – especially Southeast Asia – remains a bright spot, even as the global economy looks set to head into recession next year, economists say.
The strong economic rebound in Asia earlier this year has lost its momentum due to three “formidable headwinds” — that is, rising interest rates, the war in Ukraine and the impact of China’s subdued economic activity, the International Monetary Fund said last week.
“Despite this, Asia remains a relative bright spot in an increasingly dimming global economy,” the IMF said in its latest outlook report “Asia Sails Into Headwinds From Rate Hikes, War, and China Slowdown.”
The IMF predicted growth for Asia and the Pacific at 4 percent this year and 4.3 percent in 2023, with both below the 5.5 percent average over the last two decades.
Still, they are higher than the fund’s forecasts for Europe and the U.S. The IMF is expecting growth of 3.1 percent in 2022 and 0.5 percent in 2023 for the euro area; and 1.6 percent growth this year and 1 percent next year for the U.S.
Overall, Asia’s path will be different from many advanced economies such as Europe as it serves as a “useful diversifier that is insulated to a degree from the struggles facing Europe,” Fidelity’s Portfolio Manager Taosha Wang said in a note last week.
“This implies more headroom for growth-oriented policies in the region, which differs from many other parts of the world where high inflation is forcing central banks to tighten financial conditions,” Wang said.
India needs regional cooperation to reach economic growth goals
In the next five years, India may overtake Germany and Japan to become the third-biggest economy in the world, according to the International Monetary Fund (IMF) World Economic Outlook database, India media outlets reported.
The optimistic sentiment toward India’s economy was buoyed when India overtook the UK as the fifth-largest economy in the last quarter of 2021. India is likely to become the third-largest economy in the world by 2029, a State Bank of India (SBI) research report forecast in September.
Just a decade ago, India’s GDP was the 11th largest in the world. Now, with 7 percent growth forecast for 2022, India has reasons to be optimistic about its economic growth. But it will not be an easy task for the country to maintain the growth rate, especially amid global economic gloom, as historic data shows that it is a hard task for a country to maintain a growth rate above 7 percent for a long time.
There is no shortage of voices in India urging caution about its economy. Congress MP Shashi Tharoor said in September that the country should not get “carried away” by reports the Indian economy had become the fifth largest in the world, as challenges from the country’s sizeable population remain a concern.
BOJ recommits to easing, Japan warns of action to fight volatile Yen
Bank of Japan Governor Haruhiko Kuroda on Monday reiterated his unwavering commitment to maintaining ultralow rates to support the fragile economy, even as the finance minister warned again of “decisive” action to stem volatile yen movements.
Kuroda’s comments at a parliamentary session came after the yen plunged to its lowest level in 32 years versus the U.S. dollar, reflecting the widening monetary policy gap between Japan and the United States. U.S. President Joe Biden has said he is “not concerned” about the strength of the dollar.
The seemingly mixed messages by Japanese authorities show the difficulties faced by Japan.
The BOJ, on the one hand, takes the view that the current round of cost-push inflation, –a phenomena largely caused by higher import costs for energy, raw materials and food– is not sustainable, and monetary easing is necessary to ensure its 2 percent target is achieved stably accompanied by wage increases.
But the weaker yen, a byproduct of the BOJ’s dovish stance, has inflated import costs to the detriment of the Japanese economy. The government is preparing a comprehensive economic package, which will include inflation-relief steps.
“Japan’s economy is in the midst of recovery from COVID-19. Higher commodity prices, on the back of the situation in Ukraine, have been leading to an outflow of income from Japan to overseas, adding downward pressure on the economy,” Kuroda told a session of the lower house Budget Committee.
China congress: Beijing delays key economic figures as leaders meet
China has delayed the release of its latest economic growth figures, which were due to be published as the Communist Party’s leadership gathers.
President Xi Jinping is expected to be confirmed for a historic third-term at this week’s party congress in Beijing.
The National Bureau of Statistics (NBS) did not give a reason for the delay.
The decision has been described as “very rare” by experts and is seen by some as a sign of further weakness in the world’s second largest economy.
However, Zhao Chenxin, deputy head of China’s National Development and Reform Commission, said on Monday that the country’s economy had “picked up significantly in the third quarter”.
“Globally China’s economic performance also remains outstanding. Consumer prices have risen modestly, in sharp contrast to the high global inflation, and employment remained generally stable,” he told a news conference.
According to an updated NBS calendar, publication of several key economic indictors on Tuesday, including third quarter gross domestic product (GDP), had been “postponed”.
Indonesia’s economy robust despite challenges
Deputy Minister of Finance Suahasil Nazara claimed that Indonesia’s economy has remained robust after going through a number of crises that started with the Covid-19 pandemic up to the current geopolitical situation that has disrupted the global supply chain.
“I think Indonesia’s economy is resilient enough. In the second quarter of 2022, we grew by 5.4 percent and in 2022, we believe it will be above 5 percent, maybe around 5.2 percent,” he said in the 100 Years Webinar of Eka Tjipta Widjaja on Monday, October 17, 2022, as reported by Antaranews.
Suahasil stated that one of Indonesia’s economic resilience is evident from the growth that exceeds 5 percent in the first and second quarters, while at the same time a number of countries were actually under pressure due to the wars in Ukraine and Russia as well as the pandemic.
The deputy minister still believes that Indonesia’s economic growth will meet its 5.2 percent goal in 2022 with a relatively maintained inflation that is currently around 5.95 percent amidst the fuel price increase.
Despite his optimism, Suahasil underlined that Indonesia must remain vigilant considering that what happened in the past two and a half years of this pandemic left a scarring effect on the economy from the supply side.
No difficulty in paying Maldives’ debt: Ameer
Finance Minister Ibrahim Ameer said on Monday that there is no difficulty in repaying the debt the government is under.
In response to questions asked by parliament members regarding the economic status of Maldives, Ameer said the nation’s economy is going better than expected.
He said that the National Bureau of Statistics had estimated that Maldives’ economy would see a 37 percent improvement by the end of 2021. However, the latest data from the bureau indicate that the economy had improved by 41.6 percent.
“Maldives is one of the fastest growing economies in the world, post the Covid-19 pandemic. Therefore, Maldives’ economy is on a positive track,” Ameer said.
Referring to the recent Fitch Rating assigned to Maldives, Finance Minister said while Maldives’ economy is doing well as industries such as tourism and construction have improved, due to external global circumstances, the outlook has become negative.
Ameer said that the Maldives has no difficulty in paying off its debts so far. He said that the debts incurred during the previous five years were also paid off at the most difficult times of 2020.
He said that the debt accumulated by the previous administration amounted to MVR 39 billion. However, the debt is now at MVR 37 billion despite the fact the current government had taken loans to be able to pay its workers during the pandemic.
Nepal’s economic growth will reach 4.2pc and price growth 8.1 pc in 2022
The International Monetary Fund (IMF) has projected that Nepal’s economy (Gross Domestic Product) will grow by 4.2 percent in the current financial year.
Making the projection public on World Economic Outlook, the IMF predicted that Nepal’s economy will grow by 5 percent in 2023 and only 5.3 percent by 2027.
Similarly, according to the IMF, the price increase in Nepal in the current fiscal year will be 8.1 percent and this rate will decrease to 7.1 percent in 2023.
According to the report, based on the size of the economy, the current account deficit will be of 12.1 percent. In the last fiscal year, Nepal’s current account was down by 623 billion. The current account shows the amount of money coming in and going out from the country based on the country’s import and export, income from remittances, etc.
The IMF has predicted that the growth of the world economy will also be limited to 3.2 percent. In 2021, there was an increase of 6 percent and the inflation in the world will increase from 4.7 percent to 8.8 percent in 2022.
Australia, Singapore sign ‘green economy’ pact
Australia and Singapore agreed on Tuesday on a “green economy” deal to boost cooperation on climate investment, financing and technology.
Singapore Prime Minister Lee Hsien Loong told a news conference in Canberra that the agreement would start with initiatives such as developing a list of environmental goods and services that could be given preferential trade treatment.
“It will support the transition of our countries to net zero emissions as well as create jobs and growth opportunities in green sectors promote the development and commercialisation of green technologies,” Lee said.
Australian Prime Minister Anthony Albanese cited the A$30 billion ($18.8 billion) Sun Cable project, which aims to export solar power from Northern Australia to Singapore via Indonesia, as an example of what the agreement aims to achieve.
“A project like Sun Cable which has the potential to export clean energy to Singapore is the ultimate win-win,” Albanese said.
Lee, asked about U.S. export controls targeting the Chinese semiconductor industry, told the news conference the issue was “very serious” and raised concerns about economic decoupling.
Restructuring Sri Lanka’s debt talks
There is no doubt that International Monetary Fund (IMF) loans often come with a set of conditionalities that most countries find unfavourable to implement. With its ongoing economic crisis and complex multilateral debt negotiations between creditor nations, Sri Lanka is no exception.
The IMF extended a loan of US$2.6 billion to Sri Lanka in 2009 on the condition that Colombo reduces the country’s budget deficit to around 5 percent of GDP. But the island nation failed to improve its exports or growth, so it requested another IMF debt facility of about US$1.5 billion in 2016. That was also ineffective due to internal issues ranging from multiple monsoon failures derailing agricultural productivity to the politically destabilising constitutional crisis of October 2018.
Between 2015 and 2019, the country’s growth rate fell from 5 percent to 2.9 percent and government revenue contracted from 14.1 percent to 12.6 percent of GDP. The bitter coincidence of falling output and revenue made Sri Lanka reluctant to seek an IMF bailout in the early stages of its 2022 sovereign debt crisis — diminishing its options to avert the current economic disaster.
The COVID-19 pandemic has been harsh for the entire South Asian region, with countries seeking hefty assistance from the IMF. Apart from Sri Lanka, the IMF has approved a loan tranche of US$1.17 billion to flood-hit Pakistan. Bangladesh formally requested an IMF loan of US$4.5 billion in June 2022 due to inflationary pressures, a volatile taka and depleted foreign exchange reserves.