Key takeaways from our South-east Asia Regional Strategic Forecast

Article tags BusinessEconomySouth-east AsiaSingaporeSouth-east AsiaBusiness, Industry

In late September, Corporate Network’s South-east Asia chapters presented our Regional Strategic Forecast (RSF) in both Kuala Lumpur and Singapore. Our Chief Economist, Dr Simon Baptist, shared our outlook on the global economy amidst a time of complexity, headwinds and uncertainty. 

The three biggest challenges the global economy faces are:

• A protracted war in Ukraine
• Global monetary tightening
• China’s economic slowdown

The war rages on

We expect the shooting war in Ukraine to last until the end of this year, and sanctions to remain in place for the next 5 years and beyond. Its main effects on the global economy can be felt through Russia’s weaponisation of energy supplies, higher commodity prices and supply-chain disruptions. 

Europe will be the worst hit and will experience a recession in 2023, with full year recessions in Germany, France, Italy, Spain and the UK. Oil prices will remain elevated, gas prices will roughly double in developed economies and the global prices of food commodities will rise by about 20%, fueling global consumer price inflation, which we estimate will stand at nearly 10% this year, its highest level in 26 years. 

The time of easy credit is over

We’re seeing aggressive monetary tightening, the likes of which we have not seen in decades. The Federal Reserve’s monetary tightening has prompted us to lower our US growth outlook to 1.5% in 2022 and just 0.5% in 2023. This has spillover effects such as capital flights and volatile asset price raise precautions in developing economies.

A simultaneous global economic slowdown

China’s recent economic slowdown is a third drag on global growth, with ripple effects throughout the Asia region. We now expect growth of only 3.3% in China in 2022, owing to zero-covid policies, a power crisis, property sector woes and slowing global demand. 

With the EU, China and the US economies all slowing markedly, we now estimate global GDP growth of 2.6% in 2022 and only 1.7% next year. 

Is there any good news? 

Asia’s limited trade and investment linkages with Russia and Ukraine mean that the conflict has not had the same impact as in Europe, even if indirect impacts are felt through inflation. Australia, Indonesia and Malaysia are showing signs of resilience as commodity exporters. Trade dependent economies, such as South Korea and Vietnam, have also proved resilient.

We extend our heartfelt gratitude to our guest speakers:

• Simon Baptist, Chief Economist and Editorial Director, EIU
• Natalia Novikova, Resident Representative in Singapore, International Monetary Fund
• Paul Burton, General Manager, IBM Asia Pacific
• Ashvin Murthy, Chief Investment Officer at AVM Capital
• Julian McGill Conway, Head of South-east Asia, LMC International
• Nick Khaw, Head of Research & Economist, Khazanah Nasional Berhad

Wed, 12th Oct 2022 Article tags BusinessEconomySouth-east AsiaSingaporeSouth-east AsiaBusiness, Industry