Pacific Rim Economies in Doldrums, Suffering from Inflation, and War – The Diplomat

Pacific money | Economie

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

Economies in the Asia-Pacific region are expected to fall into recession this year as decades of high inflation and the war in Ukraine exacerbate geopolitical uncertainty and the after-effects of the pandemic.

A report on Pacific Rim Economies released by the Asia-Pacific Economic Cooperation said on Friday that growth in the region is likely to more than halve this year to 2.5 percent from 5.9 percent last year, when many countries were recovering from Worst case of corona virus. 19 outbreaks.

Weaker growth in the US and China is a big factor behind the regional crisis, although other economies have slowed as well. The Russian economy is expected to contract due to the fallout from the war in Ukraine, the report said, and the three economies account for nearly 70 percent of the APEC region’s gross domestic product.

The report expected regional growth to rise only slightly in 2023, to 2.6 percent.

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

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In China, where authorities are still imposing lockdowns to stem the COVID-19 outbreak, the economy shrank 2.6% in the three months to June from the previous quarter after Shanghai and other cities were shut down to combat the coronavirus outbreak.

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

The Japanese economy contracted at an annual rate of 0.5 percent in the January-March period, and is expected to expand only 2 percent in the fiscal year ending in March 2023.

Some economies are doing better.

Indonesia reported on Friday that its economy grew at a better-than-expected annual rate of 5.4 percent in the April-June quarter as it recovered from a wave of the variable Omicron virus infection.

As an exporter of raw materials such as coal and palm oil, the country saw a jump in its exports of about 20 percent in the last quarter with the price hike of many materials. But analysts said these windfall gains are likely to fade as price increases ease or reverse.

“We expect slower growth in the rest of the world to take its toll… as commodity prices continue to decline. On the domestic front, headwinds are growing for high inflation, which is at a seven-year high and is set to rise,” said Alex Holmes of Oxford Economics in a commentary. More in the coming months.

India is also growing faster than most other countries in the region.

Reserve Bank of India Governor Shaktikanta Das expected growth to remain solid at 7.2 per cent in the fiscal year ending March 2023. But to counter inflation of 6.7 per cent in June, the central bank raised the key interest rate on Friday by half. percentage point to 5.4 percent.

The APEC report said that more than half of the 21 APEC members have raised interest rates or tightened monetary policy to counter inflation, which now averages 5.4 percent for the region.

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

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