East & South Asia Economic Forecast

Economic Snapshot for East & South Asia

November 18, 2022

  • East Asia

Economic Outlook

Regional growth should gain steam in 2023 due to stronger momentum in China more than offsetting slowdowns in Korea and Taiwan. The recent easing of China’s Covid-19 and property curbs are outlook-positive. That said, risks are still numerous, and include a slow phasing-out of China’s tough Covid-19 stance, recessions in Western countries and China-Taiwan tensions.

Inflation

Regional inflation fell to 2.5% in October from 3.1% in September on lower price pressures in China, Korea and Taiwan. Inflation will be muted this year and next compared to other parts of the world on weak demand and massive domestic manufacturing capacity. Lockdowns in China, the Fed’s tightening cycle and domestic monetary policies are key factors to watch.

 

  • South Asia

Economic Outlook

Growth will weaken further in 2023. On one hand, balance -of-payments pressures and inflation should ease somewhat, with the latter aiding private consumption. However, domestic demand will be hit by interest rate hikes and IMF-mandated austerity. Social unrest and extreme weather are key risks.

Inflation

Regional inflation rose to 10.3% in October from 10.1% in September on higher inflation in Pakistan. In contrast, inflation in Bangladesh and Sri Lanka eased. Average inflation should soften in 2023 on cooling commodity prices, but remain elevated on subsidy cuts and weak currencies. Further FX depreciation and subsidy cuts pose risks.

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