KUALA LUMPUR (Aug 16): Weakened trade patterns and persistent inflation will dampen economic growth in the second half of this year, but 2022 will maintain its general pattern of economic recovery and expansion across the Asia Pacific (APAC) region, said Moody’s Analytics on Tuesday (Aug 16).
In its analysis titled “APAC Outlook: Surviving the Year’s Rocky and Uneven Start”, the research firm said rounding out the regional leaders for this year, Malaysia and Indonesia will benefit from high commodity prices this year, even if many prices have already peaked or soon will.
Moody’s Analytics said the outlook for the remainder of this year has shifted the most for China and Hong Kong, with real gross domestic product (GDP) growth this year in China projected to reach only 3.4%.
“Our July forecast estimate of 4.3% was lowered by the lack of a significant impact from the housing market or consumer spending stimulus and the quarterly GDP decline in the second quarter,” it added.
It noted that the continuation of Covid-19-related restrictions in China through mid-August added to this uncertainty, although current restrictions are limited and located inland, away from major manufacturing and shipping centres.
Moody’s Analytics said the greatest uncertainty within the APAC region was inflation.
“While global oil prices specifically and commodity prices in general have begun to ease over the past month, this trend is not yet reflected in consumer price inflation across the region. Inflation remains well above where it was at the beginning of this year and above most central bank target ranges,” it added.
The research firm said South and Southeast Asia face the greatest risk from a surprise in inflation and this could slow local demand for goods and services, including housing.
Moody’s Analytics pointed out that Japan, South Korea and Taiwan are more highly exposed to further supply chain disruptions from China for electronics and components. A faster than expected decline in commodity prices would dampen the economies of Australia, Indonesia and Malaysia,” it said.
It said economic growth in 2023 for APAC is expected to decelerate, following similar slowdowns in North America and Europe, as they absorb higher interest rates.
Within the APAC region, only China is expected to improve significantly next year, assuming policymakers will ease up on the dynamic zero-Covid policies, so that the risk of local shutdowns will be greatly reduced, and international travel restrictions in and out of China loosened, it added.
“There remains much uncertainty about the housing market, but current efforts at providing bailout funds for property developers should be felt next year, as more units are completed and delivered to buyers,” said Moody’s Analytics.