Economic resurgence is on the horizon for the Asia Pacific Economic Cooperation (APEC) region, comprising 21 member nations, with an anticipated growth of 3.3% in 2023 compared to 2.6% in the preceding year, as outlined in the latest APEC Regional Trend Analysis report.
The rebound is fueled by a resurgence in tourism and domestic consumption, although the lingering impacts of the pandemic, coupled with challenges like inflation, increased debt, climate change, trade protectionism, geopolitical tensions, and economic fragmentation, continue to cast shadows on the outlook.
The report underscores the uneven economic growth in the APEC region while acknowledging signs of stability moving forward.
Carlos Kuriyama, Director of the Policy Support Unit, remarked, “There are promising signs in APEC, but it is walking a tightrope amid downside risks. Economic growth in the region remains uneven, though we are looking at more stable economic growth in the years ahead.”
Inflation, a pivotal concern, witnessed a decrease to 3.4% in September 2023 compared to the previous year’s 6.6%, but the report highlights potential risks.
Factors such as export restrictions, disruptions in the fertilizer supply chain, and adverse weather conditions affecting agriculture could exacerbate inflationary pressures in the region.
Several APEC economies have responded by tightening monetary policies, increasing interest rates to combat inflation.
Rhea C Hernando, Analyst with the Policy Support Unit and co-author of the report, emphasised the need for clear communication from policymakers regarding monetary decisions to manage expectations.
Fiscal prudence is also stressed, emphasizing targeted expenditure to protect vulnerable populations and rebuild fiscal buffers.
The report draws attention to the contraction in trade during the first half of 2023, with export volume and value experiencing declines of -3.5% and -7.1%, respectively.
Inflationary pressures, elevated trade finance costs, and global uncertainties have contributed to sluggish trade.
Projections for merchandise trade exports and imports in 2023 anticipate marginal growth of 0.1% and 0.3%, respectively, with a more optimistic outlook for 2024 and 2025 at 4.3% to 4.4%.
Geoeconomic fragmentation and an accumulation of trade-restrictive measures, including trade remedies, cloud the future of trade in the APEC region, according to the report.
Demographic shifts, marked by an aging population and declining birth rates, pose additional challenges to the region’s economy, requiring workers to support a growing elderly population.
Kuriyama emphasised the importance of multilateral coordination to address trade protectionism, mounting debt, climate change, the transition to a green economy, and supply chain disruptions. Cooperation is deemed crucial to tackle the complex challenges facing the APEC region.