Economy · August 5, 2022

Pacific economies in stagnation, weakened by inflation, by war – The Diplomat

Pacific money | Economy

Most of the region’s economies are just beginning to fully emerge from border closures and other pandemic-related precautions.

Asia-Pacific economies are expected to hit stagnation this year as decades-long inflation and the war in Ukraine exacerbate geopolitical uncertainties and side effects from the pandemic.

A Pacific Area Economies report from the Asia Pacific Economic Cooperation Forum said on Friday that growth in the region is likely to decline by more than half this year to 2.5% from 5.9% last year. , when many countries were recovering from the worst of their COVID-19 outbreaks.

Weaker growth in the US and China is a major factor behind the regional malaise, although other economies are also slowing. The Russian economy is expected to contract due to the implications of its war in Ukraine, and the three economies account for nearly 70% of the APEC region’s GDP, the report said.

The report predicts that regional growth will only increase slightly in 2023, to 2.6%.

Most of the region’s economies are just beginning to fully emerge from border closures and other pandemic-related precautions. Tourists have reappeared on the streets of Bangkok, but many businesses remain closed, victims of many months in which travel was practically paralyzed.

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In China, where authorities are still imposing blockades to wipe out COVID-19 outbreaks, the economy shrank 2.6% in the three months ended June compared to the previous quarter after Shanghai and other cities were closed. to fight coronavirus outbreaks.

The US economy shrank 0.9% in April-June, while the Russian economy shrank 0.5% in January-June from a year earlier, according to its Ministry of Economic Development.

The Japanese economy shrank at an annual rate of 0.5% between January and March and is expected to expand by only 2% in the fiscal year ending March 2023.

Some economies are doing better.

Indonesia reported Friday that its economy grew at a better-than-expected 5.4% annual rate in the April-June quarter as it recovered from a wave of Omicron variant coronavirus infections.

An exporter of commodities such as coal and palm oil, the country has seen its exports rise by nearly 20% in the last quarter as the prices of many materials have soared. But that windfall gain is likely to dissipate when the price increase eases or reverses, analysts said.

“We expect the slowdown in growth in the rest of the world to peak… as commodity prices continue to decline. Domestically, headwinds from high inflation, which hit a seven-year high and is set to grow further in the coming months, are mounting, “said Alex Holmes of Oxford Economics in a commentary.

India is also growing faster than much of the rest of the region.

Reserve Bank of India Governor Shaktikanta predicted growth would remain robust, at 7.2% in the financial year ending March 2023. But to counter inflation which hit 6.7% in June, the bank Central raised its key interest rate in half on Friday to 5.4 percent.

More than half of APEC’s 21 members raised rates or otherwise tightened monetary policy to tackle inflation, which now averages 5.4% for the region, the APEC report said.

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He pointed to an overall 23% increase in the food price index of the United Nations Food and Agriculture Organization, noting that inflation is likely to remain high at least for the rest of the year as central banks they adjust their policies to try to keep it under control.