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Asia could stand out from economic doom and gloom next year: economists

Asia — especially Southeast Asia — remains a bright spot, even as the global economy looks set to head into recession next year, economists say. 

The strong economic rebound in Asia earlier this year has lost its momentum due to three “formidable headwinds” — that is, rising interest rates, the war in Ukraine and the impact of China’s subdued economic activity, the International Monetary Fund said last week. 

“Despite this, Asia remains a relative bright spot in an increasingly dimming global economy,” the IMF said in its latest outlook report “Asia Sails Into Headwinds From Rate Hikes, War, and China Slowdown.”

The IMF predicted growth for Asia and the Pacific at 4% this year and 4.3% in 2023, with both below the 5.5% average over the last two decades. 

Still, they are higher than the fund’s forecasts for Europe and the U.S. The IMF is expecting growth of 3.1% in 2022 and 0.5% in 2023 for the euro area; and 1.6% growth this year and 1% next year for the U.S.

China will recover a muted year and may post a 3.2% growth this year before accelerating to 4.4% next year assuming its Covid-zero policies are loosened gradually, the IMF says.

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Overall, Asia’s path will be different from many advanced economies such as Europe as it serves as a “useful diversifier that is insulated to a degree from the struggles facing Europe,” Fidelity’s Portfolio Manager Taosha Wang said in a note last week.

“This implies more headroom for growth-oriented policies in the region, which differs from many other parts of the world where high inflation is forcing central banks to tighten financial conditions,” Wang said.

Southeast Asia’s strong recovery

Southeast Asia will likely enjoy a strong year ahead, the IMF said. 

Vietnam is expanding from being at the center of supply chain diversification efforts while the Philippines, Indonesia, Malaysia and India will likely grow between 4% and 6%.

Tourism in Cambodia and Thailand will pick up, the IMF added.

So far, exports from the ASEAN-6 — made up of Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam — have outperformed North Asia and the rest of the region, according to DBS Bank. Higher commodity prices and supply disruptions helped exporters such as Indonesia. 

“Asia remains a relative bright spot in an increasingly dimming global economy”: IMF

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Manufacturing  purchasing managers indexes in Indonesia, Philippines, Thailand, and Vietnam “broadly stood in the expansionary zone of above 50 in September, DBS analysts Chua Han Teng and Daisy Sharma said in a note. That puts these countries higher than countries like South Korea and Taiwan. 

South Asia’s dim outlook

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