Regional Economic Outlook for Asia and Pacific, October 2023
Regional Economic Outlook, October 2023
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- Published: October 13, 2023
Major growth and inflation findings
- The Asia-Pacific region is expected to grow by 4.6 percent in 2023, up from 3.9 percent in 2022.
- Growth is projected to slow to 4.2 percent in 2024 and to 3.9 percent in the medium term.
- Economic activity in Asia and the Pacific remains on track to contribute about two-thirds of global growth in 2023.
- Inflation is expected to decline in 2024 and stay within central bank target ranges in most countries, a faster pace of disinflation than in other regions.
Drivers, risks, and scenarios
- Key headwinds: rotation of global demand from goods to services and synchronized monetary tightening.
- Downside risks:
- A weaker-than-expected recovery in China with negative spillovers to trading partners.
- A sudden financial tightening in the US or within the region inhibiting growth, especially in highly leveraged economies and sectors.
- Medium-term risks from geoeconomic fragmentation, with de-risking policies of major economies creating a potentially significant drag on growth.
- Upside scenarios:
- A soft-landing scenario is becoming more plausible and would provide scope for monetary easing in 2024.
- Comprehensive productivity-enhancing reforms in China would boost medium-term growth prospects, especially for smaller and more open economies.
- Channel-specific assessments:
- Non-OECD Asian countries can benefit from trade diversion effects of “friend-shoring” by both China and the OECD, though benefits largely dissipate once the global slowdown caused by friend-shoring and “reshoring” is considered.
Sectoral and regional analysis highlights
- China’s structural slowdown and lower productivity growth in many other economies are key factors dampening the region’s potential.
- Differences in inflation dynamics across regions and within Asia reflect how inflationary shocks manifested:
- External shocks to food, fuel, and supply chains were important, but Asian economies generally felt these pressures less than elsewhere.
- The composition of products and services and direct policies to restrict price increases contributed to lower inflation in Asia.
- Pandemic responses, including longer-lasting lockdowns in Asia-Pacific countries, tended to dampen demand and inflation.
- Recent fiscal and monetary policies have helped manage and reduce inflation rates in the region.
Policy recommendations
- Monetary policy:
- Central banks should carry through with policies to ensure that inflation is durably at appropriate targets.
- Tight monetary policy should be complemented with careful financial supervision and modernized resolution frameworks to safeguard financial stability.
- Fiscal policy:
- Credible medium-term fiscal frameworks and consolidation can preserve fiscal space and debt sustainability.
- Structural policy:
- Structural measures should tackle risks posed by de-risking strategies across all of Asia while ensuring productivity growth, the green transition, and inclusive and sustained growth.
- China-specific:
- Comprehensive reforms in China would boost medium-term growth prospects and generate positive spillovers across the region, particularly for smaller and more open economies.
Regional Economic Outlook for Asia and Pacific, October 2023 — International Monetary Fund
Content in this bundle
- Chapter 1
- Chapter 1 Annex
- Chapter 2
- Chapter 2 Annex
- Chapter 3
- Chapter 3 Annex
- Full Report