The International Monetary Fund's (IMF) semi-annual forecast for global economic growth has revealed a downward trend. According to the IMF's World Economic Outlook (WEO) report released in October 2022, the global economy will grow by just 2.7% in 2023, a staggering figure compared to the 3.2% growth in 2022 and 6% growth in 2021. However, the report indicates that growth in Southeast Asia is still on an upward trend, given the lower projections for 2023 for other developed countries.
“Asia remains a relative bright spot in an increasingly gloomy global economic outlook,” the IMF said, “but it faces headwinds from rising interest rates, war and a slowdown in China.”
The IMF reported that Asia-Pacific gross domestic product (GDP) growth is expected to be 4.3% in 2023, higher than the 4% forecast for 2022. Growth rates for these countries are generally lower than the 6.5% growth rate expected in 2021, but remain stable compared with downward projections for other countries, such as advanced economies and the euro area.
The euro area is expected to post strong GDP growth of 5.2% in 2021, before slowing sharply to 3.1% in 2022 and then to 0.5% in 2023. Meanwhile, developed economies are forecast to grow just 1.1% in 2023, down from the 2.4% growth rate in 2022.
On the bright side of these gloomy forecasts, Southeast Asia's projections are higher than North Asia, showing a more positive trend, with Vietnam, Malaysia, Indonesia, the Philippines, and Thailand all showing higher figures of 4% to 6% in 2023. According to a report conducted by DBS Bank, exports from Southeast Asian countries are leading the way compared to North Asian countries.
According to the IMF, the tourism sector in Cambodia and Thailand, along with foreign direct investment and merchandise exports, will help fuel the economic growth of both countries. Thailand's GDP forecast for 2023 is 3.7 percent, while Cambodia's economy is expected to grow 6.2 percent. This is because there has been a lot of foreign direct investment into sectors such as real estate in Cambodia, which is expected to continue to grow.
To make it easier to understand, let’s take a look at a quick rundown of the IMF’s growth projections for 2023.
Asia Pacific → 4.3%Emerging and Developing Asia → 4.9%Cambodia → 6.2%Developed Countries → 1.1%World Forecast → 2.7%
The global economy is affected by numerous challenges such as inflation, the Russia-Ukraine war, the lockdown and COVID-19 measures in China, collective financial restrictions, etc. However, while it may take time for countries to recover from the effects of the global pandemic, Asian economies have been less affected compared to the Eurozone's woes.
“This means there is more room for pro-growth policies in the region, unlike many other parts of the world where high inflation has forced central banks to tighten monetary policy,” said Taosha Wang, a portfolio manager at Fidelity Bank.
In this regard, despite the overall downward trend in economic growth, there is still room for a rapid recovery in Southeast Asia, as the IMF's forecasts attest.