Quick Bites | Asia will contribute 70% of global growth this year
May 12th, 2023 | Article
By: Paul Zwi
Asia and the Pacific region is a relative bright spot amid the more sombre context of the global economy’s rocky recovery. As the International Monetary Fund (IMF) chart below shows, the region will contribute about 70% of global growth this year – a much greater share than in recent years. And of course, Australia’s proximity to the region is a huge advantage for our economy.
The IMF notes in a recent report the resilience of the world’s most dynamic region. Growth in Asia and the Pacific is forecast to accelerate to 4.6% this year from 3.8%.
The main development has been the reopening of China, where surging consumption is boosting growth across the region despite weaker demand from the rest of the world. Risks to the outlook include spillovers from greater-than-expected US monetary policy tightening and supply chain disruptions associated with geo-economic fragmentation.
But the region also faces important challenges. In the short term, monetary and fiscal policies will need to remain tight to bring inflation back to central bank targets and stabilise public debt. While Asia’s financial systems haven’t seen major impacts following recent banking turmoil in the US and Europe, they need to be carefully monitored given the high leverage among households and corporates.
In the longer term, the Chinese economy which has been the primary engine of regional and global growth for decades is expected to slow considerably in the face of unfavourable demographics and a productivity slowdown. As the IMF advises, the region should prioritise structural reforms to boost long-term growth, while accelerating the green energy transition.
Disclaimer: Clime Asset Management Pty Limited | AFSL 221146 | ABN 72 098 420 770. The information provided in this post is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information contained therein. Please consider the relevant disclosure document/s before investing in one of our products. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance of financial products is not a reliable indicator of future performance or returns.
The information contained in this website and video presentations is of a general nature. It is not advice or a recommendation to invest in a financial product and constitutes general financial product advice only. The advice has been prepared without taking into account your objectives, financial situation or needs. You should, before acting on the advice, consider the appropriateness of the advice having regard to your objectives, financial situation and needs. Before making a decision about whether to acquire a financial product, you should obtain and consider the Product Disclosure Statement, Information Memorandum or Financial Services Guide. We encourage you to obtain professional advice before deciding to invest in a financial product.
Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance is not a reliable indicator of future performance.