Outlook Improves Despite Slowdown in 2023 Growth
China Ends Restrictions; U.S. Financial Turmoil
Upward revisions to economists' forecasts signal a less pessimistic outlook for Asia's economy in 2023. Although growth rates are expected to slow in 2023 due to backlash from high growth in 2022, the outlooks for both ASEAN and India have been revised upward. Expectations for exports of goods and services to China have also increased due to the lifting of China’s zero-COVID policy in December 2022, along with the recovery of domestic demand following the lifting of COVID restrictions in each country. On the other hand, the collapse of Silicon Valley Bank in March 2023 heralds a rise in financial instability originating in the U.S.. The Fed's monetary policy is caught between a high inflation rate and fears of a rapid economic downturn due to financial instability. There is a possibility that the impact will spread to Asia’s economy through financial markets and trade channels, and the central banks of Asian countries are watching the Fed closely.
The Japan Center for Economic Research and Nikkei conducted the twenty-ninth quarterly consensus survey on Asian economies from March 3 to 24, asking about the economic outlook for 2023-2025. It collected 42 answers from economists and analysts in the five main members of the Association of Southeast Asian Nations—Indonesia, Malaysia, the Philippines, Singapore, and Thailand—and in India.
The outlook for the ASEAN 5 countries in 2023 has been revised upward by 0.1 point from the December survey to 4.4% (table 1). The outlook for 2023 was revised downward for two consecutive periods in the June and September surveys and remained flat at 4.3% in the December survey. In 2022, ASEAN countries achieved an economic growth rate of 5.3%, up 1.2 points from the previous year, due to the lifting of urban lockdowns and the resumption of tourist arrivals from overseas. Although the slowdown in growth in 2023 is partly due to backlash, economists expect that recovering domestic demand will continue to drive growth.
Furthermore, with China’s sudden lifting of its zero-COVID policy last December, there are also expectations for increased goods and services exports to China due to the re-growth of its economy. Although China’s economic growth rate remained at 3% in 2022, the government is targeting growth of around 5% in 2023. In January, the IMF raised its 2023 China growth forecast to 5.2%, up 0.8 points from its previous forecast.
India’s outlook for fiscal year 2023/2024 (April 2023 to March 2024) has been revised upward by 0.4 points from the December survey to 6%. The outlook for fiscal 2023 was revised downward in three consecutive surveys in June, September, and December of 2022. The outlook for fiscal year 2022/2023 (April 2022 to March 2023) is expected to be 6.9%, up 0.1 point from the previous survey. Although India’s growth rate is expected to slow in fiscal 2023, this is also due to the backlash from fiscal year 2022. India is expected to become the world’s most populous country in 2023, surpassing China, whose population is declining, and strong domestic demand is expected to support high growth.
The outcome of this survey was also reported at Nikkei Asia. (April 3, 2023)
◆ Main points of the survey
- The average 2023 growth rate forecast of five ASEAN countries is 4.4%, down from 5.3% in 2022 but revised upward by 0.1 point from the previous survey in December. The previous survey had kept its 2023 growth predictions unchanged. India’s growth rate forecast in fiscal 2023/2024 is 6.0%, also predicting a fall from 6.9% in fiscal 2022/2023, but revised upward by 0.4 points after three consecutive downward revisions in previous surveys.
- Although the slowdown in growth in 2023 is partly due to backlash, economists expect the recovery of domestic demand to continue to drive growth. With China’s sudden lifting of its zero-COVID policy last December, there are also expectations for increased exports to China, both goods and services, due to the re-growth of China’s economy.
- On the other hand, March brought concern over U.S. financial instability, which could spread to Asia through financial markets and trade channels. This event is affecting the Federal Reserve Board’s decision on policy interest rate hikes. Central Banks in Asia are watching the Fed closely.
Indonesia: Dendi Ramdani, head of industry and regional research department, Bank Mandiri; Umar Juoro, senior fellow, The Habibie Center; Wisnu Wardana, chief economist, PT Bank Danamon Indonesia.; Piter Abdullah, executive director, Segara Research Institute; Josua Pardede, chief economist, Permata Bank
Malaysia: Wan Suhaimie bin Wan Mohd Saidie, head, economic research, Kenanga Investment Bank; Vincent Loo Yeong Hong, senior economist, KAF Research; Mohd Sedek Jantan, head of wealth research & advisory, UOB Kay Hian Securities, Lee Heng Guie, executive director, Socio-Economic Research Centre (SERC)
Philippines: Ina Judith Clabio, research and business analytics officer, Metrobank; Victor Abola, senior economist, University of Asia and the Pacific; Domini Velasquez, chief economist, China Banking Corporation; Carlo Asuncion, chief economist, Union Bank of the Philippines; Jojo Gonzales, managing director, Philippine Equity Partners; Nicholas Mapa, senior economist, ING Bank Philippines
Singapore: Manu Bhaskaran, CEO, Centennial Asia Advisors; Randolph Tan, director, Centre for Applied Research, Singapore University of Social Sciences; Song Seng Wun, director, CIMB Bank; Alvin Liew, senior economist, UOB Group
Thailand: Poonyawat Sreesing, senior economist, Siam Commercial Bank – Economic Intelligence Center; Lalita Thienprasiddhi, senior resercher, Kasikorn Research Center; Krungsri Research Team, Bank of Ayudhya; Amonthep Chawla, head of research, CIMB Thai Bank; Lee Ju Ye, economist, Maybank Investment Banking Group
India: Punit Srivastava, head of research, Daiwa Capital Markets India; Dharmakirti Joshi, chief economist, CRISIL; Tirthankar Patnaik, chief economist, National Stock Exchange of India; Aurodeep Nandi, India economist, Nomura India; Bidisha Ganguly, chief economist, Confederation of Indian Industry
For multiple countries: Euben Paracuelles, chief economist, Nomura Singapore; Suhaimi Ilias, chief economist, Maybank Investment Banking Group; Brian Tan, Regional economist, VP, Barclays Bank, Singapore; Shreya Sodhani, regional economist, Barclays Bank, Singapore
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