China recovery to boost economies in Asia-Pacific

The Asia Pacific (APAC) region is expected to be resilient to global economic headwinds and post higher growth this year than last year as it gets a boost from an economic revival in China, according to S&P Global Market Intelligence.

“Despite global economic headwinds from slowdowns in the US and EU economies, economic growth in the APAC region is forecast to strengthen in 2023,” Rajiv Biswas, Asia Pacific chief economist at S&P Global Market Intelligence, said in a report.

He said APAC is forecast to be the fastest growing region in the world this year, with its gross domestic product (GDP) growth expected to rise to 4.2 percent this year from 3.2 percent last year.

For next year, APAC economic growth is expected to climb further to 4.7 percent.

“The key driver for the improvement in APAC regional growth will be from the rebound in growth momentum in mainland China due to the easing of COVID-19 restrictions,” Biswas said.

With the relaxation of pandemic-induced restrictions in China, he said its GDP growth rate is forecast at 5.3 percent this year, up from three percent last year, which is one of its weakest annual performances since the mid-1970s.

Biswas said the latest S&P Purchasing Managers’ Index surveys tracking changes in manufacturing conditions signal rebounding economic activity in mainland China, as well as continued expansion in India and a number of Southeast Asian industrial economies.

He also said APAC is expected to remain resilient to the recent financial shockwaves to the US banking system, provided the US financial stability risks are contained.

“The announcement that Credit Suisse will borrow CHF 50 billion from the Swiss National Bank in a fully collateralized covered loan facility and short-term liquidity facility is also expected to mitigate potential contagion risks in the Western European banking sector, reducing any potential transmission risks to the APAC region,” he said.

He said improving demand for electronics globally should benefit APAC’s electronics manufacturing sector.

“The upturn in global electronics demand is important for the APAC manufacturing outlook, as electronics manufacturing is a significant part of the manufacturing export sector for many Asian economies, including South Korea, mainland China, Japan, Malaysia, Singapore, Philippines, Taiwan, Thailand and Vietnam,” he said.

For the Southeast Asian economies, he said economic growth would be supported by strong domestic demand.

In the Philippines, he said economic growth is now expected to be at around 5.8 percent for this year, up from the previous forecast of 5.6 percent, with consumption, infrastructure spending, remittance inflows, and expectations of a rebound in China as drivers.

The Philippine economy grew by 7.6 percent last year, the fastest growth rate posted since 1976.

While APAC is expected to grow at a faster pace this year, he said there are still downside risks to the economic outlook, including slower growth in the US and Europe, which would affect the region’s exports.

Further monetary policy tightening in the US and Europe could also lead to protracted weak demand in key markets this year.

In addition, Biswas said there are continuing uncertainties and downside risks from the potential contagion effects from the recent banking sector shocks in the US and Western Europe.

“Despite these risks and uncertainties, the base case scenario is for real GDP growth in the APAC region to strengthen in 2023,” he said.