Global financial conditions have tightened, reflecting a faster pace of monetary policy tightening by the US Federal Reserve. As a result, fear of a recession in the United States has heightened and risk aversion has spiked, AMRO said in its quarterly update of the ASEAN+3 Regional Economic Outlook (AREO) released this month.
The region’s baseline growth forecast (4.3 per cent) has been revised downwards and the inflation forecast (5.2 per cent) has been revised upwards for 2022. In 2023, growth is expected to strengthen to about 5 per cent, with inflation moderating to about 3 per cent.
Gross domestic product (GDP) data released for Q1 2022 point to uneven growth momentum across the region.
Global supply chain disruptions continue to have an impact on trade and economic activities. Airspace and shipping lane closures resulting from the war in Ukraine have exacerbated pandemic-era supply-chain disruptions, the update said.
The recent lockdowns in China have compounded the pressure by constricting port activity and limiting the production of intermediate goods. According to the latest trade data, the region’s exports have slowed in both value and volume terms.
The slowdown in China and key trading partners has weighed on growth in Japan and South Korea.
The 2022 growth forecast for ASEAN, on the other hand, remains unchanged from April’s projections. ASEAN is poised to expand strongly by 5.1 per cent after last year’s setback due to the outbreak of the Delta COVID variant. In 2023, growth for the whole ASEAN+3 region is expected to strengthen to 4.9 per cent.
As the likelihood of a quick resolution to the war in Ukraine has all but evaporated in the last three months, this will amplify existing risks to the region’s outlook as commodity prices stay elevated and supply chains continue to experience disruptions, the update added.
ALCHEMPro News Desk (DS)
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