Emerging Asia resilient to global uncertainity, says OECD

Vietnam to remain fastest growing Asian economy in 2023


March 31, 2023

/ By / Paris

Emerging Asia resilient to global uncertainity, says OECD

Paris-based OECD is optimistic about the performance of emerging economies in Asia

In its latest economic forecast on Emerging Asia, Paris-based OECD says that the region has held up well to the headwinds hurting global economies. It goes on to say that while Vietnam will continue to be the fastest growing Asian economy in 2023 as well, India should overtake it in 2024 and become the fastest growing Emerging Asian economy again.

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Paris-based Organisation for Economic Cooperation and Development, a rich country club, is optimistic about the performance of emerging economies in Asia, saying that the region has proved to be resilient to the numerous global crises and has managed to accelerate growth rates.

The OECD says that the economies of the region, the ASEAN-10 countries, China and India, have stood up well to the challenges presented by the COVID-19 pandemic, Russia’s war of aggression against Ukraine and a global economic slowdown. It says that this is partly due to appropriate monetary and macroeconomic policy responses, sound export performance, and robust domestic demand in some countries. The average GDP growth rate for Emerging Asian countries is expected to increase to 5.3 pc in 2023 and 5.4 pc in 2024.

The OECD forecsts that ASEAN’s average real GDP growth is set to reach 4.6 pc in 2023 and 4.8 pc in 2024, weaker than in 2022, but showing resilience.

OECD says that Indonesia’s real GDP grew by 5.3 pc in 2022, boosted by strong domestic consumption, investment and exports. Indonesia’s investment will rebound thanks to recent legislation to stimulate it, and construction and mining leading the way. The monetary authority is raising interest rates to counter inflation and prevent capital outflows. The fiscal deficit is expected to be reduced by removing pandemic-related support and adjusting taxes.

In Malaysia, real GDP grew by 8.7 pc in 2022, led by domestic consumption and services, but net exports made a negative contribution to growth. In 2023, economic growth is expected to moderate to 4.0 pc due to the global economic slowdown and tighter monetary policy. Malaysia’s trade surplus is expected to increase in 2023, though the services account will be weak. Malaysia will also benefit from increased demand for semiconductors and as a provider of liquefied natural gas.

OECD says that Vietnam’s economy grew by 8.0 pc in 2022, surpassing global growth rates, and is expected to continue its strong performance at 6.4 pc in 2023, boosted by foreign investment in manufacturing, especially in electronics, machinery, and footwear. Vietnam will also benefit from China’s decision to end zero-Covid policy. However, weaker demand may slow investment growth and inflation trends need to be carefully monitored. Winding down Covid-19 pandemic recovery initiatives will improve the fiscal situation.

It says that China’s real GDP grew by 3 pc in 2022, driven by investment and exports. Private consumption continued to contribute positively to growth in 2022. China’s zero-Covid policy was abandoned, and an increase in Covid-19 cases is projected to suppress economic activity early in 2023. However, this could be followed by rapid increases in both demand and supply due to the resolution of pent-up demand accumulated during the zero-Covid period. The government will continue its focus on the property market to rebuild market confidence. Inflationary pressures were very mild in 2022, though a slight increase is expected in 2023.

On India, the OECD is very bullish. It says that GDP growth for 2023 is projected to be 5.9 pc due to weak external demand and high borrowing costs, while inflation will need to be monitored closely. The agricultural sector has seen an increase in agricultural yields and a continuation of minimum support prices for various products. India will also benefit from an improved investment climate brought on by a reduction in corporate taxes, and new incentives for tax compliance.

It says that Emerging Asian economies will remain appealing destinations for foreign direct investment. Exports supported growth in 2022, but show some signs of weakening Emerging Asia’s recovery from the Covid-19 pandemic was supported by surging exports, particularly in consumer electronics, due to higher demand for stay-at-home goods. However, the war in Ukraine led to higher food and energy prices, causing persistent inflationary pressure. The slowing global economic growth is expected to weaken external demand in 2023.

Nevertheless, continued pent-up regional demand for tourism is expected to partially offset weak exports of goods. The removal of China’s zero-Covid policy should boost tourist arrivals in the region, benefiting economies that rely on international tourism revenues. Employment picks up gradually in the region but is not yet fully recovered Labour markets in Emerging Asia are recovering from the pandemic, but still face challenges such as supply-side shocks due to the war in Ukraine and inflation.



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