Economic growth in Emerging Asia will remain vulnerable to external headwinds in 2023. Real GDP growth for the member countries of the Association of Southeast Asian Nations (ASEAN) will weaken and is forecast at 4.2% in 2023 and 4.7% in 2024. Emerging Asian economies are projected to grow by 5.3% on average in 2023 and by 5.5% in 2024, according to the projections of the OECD Development Centre. Robust private consumption will continue to propel economic growth in major ASEAN economies, supported by an improving labour market. At the country level, the growth outlook will vary depending on the robustness of economic fundamentals amid global headwinds and various risks to growth. For instance, among Southeast Asian countries, GDP growth in Indonesia is expected to be robust, while Myanmar’s growth momentum remains weak. China’s growth will display resilience in 2023, but it will be weaker than expected amid the slowdown in global demand. India is expected to see sustained economic expansion, driven by strong domestic demand.
The main findings in this year’s update to the Economic Outlook for Southeast Asia, China and India 2023 are the following:
Emerging Asia will face challenges in coping with persistent global headwinds in 2023. Export growth experienced substantial contraction following a prolonged downturn in external demand. Robust private consumption and the thriving services sector will remain the key drivers of economic growth. Growth is expected to average 4.2% in Southeast Asia and 5.3% in Emerging Asia as a whole (the ten ASEAN countries plus China and India).
The region’s services sector will maintain robust growth momentum, driven by factors including an upsurge in services industries across areas such as tourism, retail trade, services exports, supply chain-linked services, e-commerce and other digital-based services. Robust domestic demand is expected to sustain the expansion of the services sector, while increasing cross-border tradability of services will fuel the sector’s rapid rise. The region’s merchandise exports market experienced a downturn though regional demand and intraregional trade helped sustain export activity.
Financial markets in Emerging Asia remain relatively stable in general, with positive sentiment, supported by cautious monetary policies. Equity markets experienced fluctuations but are expected to maintain a positive outlook, driven by emerging sectors, particularly in the services industry, such as e-commerce, digital-based services and the services arm of the manufacturing industry. However, financial markets need to be monitored carefully.
Headline inflation in Emerging Asia is declining, but core inflation remains high in most countries. Elevated core inflation could persist in the region, driven by sticky prices in sectors like clothing, health care, education, and household goods and services.
Although capital outflow and portfolio investment outflows weakened local currencies in some economies last year, currency values in the region are recovering as appropriate monetary policies work their way into the economy. Bond markets outperformed equity markets during the first half of the year.
The travel and tourism sector is a significant source of employment in countries like China, India, Indonesia, the Philippines, Thailand and Viet Nam. The reopening of domestic and international tourism boosted the region’s economies, supporting employment growth.
Amid global supply-chain reconfiguration, countries in the region are implementing policies to strengthen their manufacturing and industrial sectors, supported by policy reforms and infrastructure development. This has catalysed inflows of FDI, which is expected to boost the export sector, creating more jobs, particularly in electronics, textiles and the automotive sector.