Asian Economic Outlook

By Frank-Jürgen Richter

December 17, 2023

The economic challenges that confronted Asia-Pacific in the previous year are gradually dissipating. Global financial conditions have become more favorable, and reductions in food and oil prices, along with a rebounding Chinese economy, are brightening the outlook. These developments are paving the way for improved prospects across the region, with growth projected to accelerate from 3.8% in 2022 to 4.7% this year. Asia is poised to become the most dynamic of the world’s major regions.

The driving force behind this dynamism is the emerging and developing economies of the region, whose economies are expected to expand by 5.3% in the current year. Notably, China and India are anticipated to account for over half of global growth in the current year, with the remaining Asian nations contributing an additional quarter. Cambodia, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam have all returned to their pre-pandemic growth levels, underscoring their resilience.

Many Asian nations have put forth ambitious development plans aimed at bolstering their local, commercial, and social infrastructures. The article delves into what the future holds for the region and examines the risks that Asia must address to ensure sustained economic growth. These topics took center stage in one of the sessions at the recently concluded Horasis Asia Meeting in Binh Duong, Vietnam. 

Development Plans

Vietnam is actively investing in upgrading its infrastructure. The country’s commitment to infrastructure development is evident in its substantial allocation of up to 6% of its GDP, significantly surpassing the regional average of 2.3%. In 2021, the government introduced Decision No. 1454/QD-TTg, which outlines a comprehensive plan for the development of the road system spanning from 2021 to 2030, with a forward-looking vision extending to 2050. The government’s objective is to expand the national highway network from its current 1,290 km to an impressive 5,000 km by 2030. This expansion includes road surface upgrades and a heightened focus on enhancing connectivity with major ports, airports, and railway stations.

Furthermore, Vietnam also plans to enhance its energy infrastructure, placing a strong emphasis on bolstering the renewable energy sector while ensuring the stability of the country’s energy supply]. This strategic approach positions Vietnam to become a frontrunner in the ASEAN region in terms of energy.

Meanwhile, in a bold move, the Chinese Communist Party announced in 2020 its commitment to an extensive digital infrastructure public spending program. This visionary endeavor, backed by a substantial investment of approximately US$1.4 trillion, encompasses the creation of innovation-centric industrial parks, the establishment of data centers, the development of internet communication network infrastructure, and the integration of traditional infrastructure with cutting-edge technologies such as the internet, big data, and artificial intelligence. This monumental initiative supports the transformation and modernization of China’s infrastructure, reinforcing its commitment to initiatives like Made in China 2025 and China Standards 2035.

Despite global economic pressure and structural distortions, Asia continues to strive towards robust growth. National and international value chains are reconnecting. Many Asian nations have proposed strong development plans to boost their local commercial and social infrastructures. What is the broad Asian outlook and how are Asian nations resolving economic uncertainties? Which future difficulties can be overcome by short- and long-term means?

Looking Ahead

Asian economies should prioritize targeted structural reforms to boost productivity, address the pandemic’s aftermath and overcome economic fragmentation. These reforms, including healthcare expansion, improved education access, support for startups and digitalization, can lead to medium-term productivity gains. Complementary policies are necessary to ensure the equitable distribution of benefits and mitigate disparities among economic groups.

Accelerating the transition to a green economy is crucial for combating climate change. This requires increased investments in climate change adaptation from public and private sources, alongside green financing mechanisms. To reduce global emissions, Asia, which is home to five of the top ten emitters globally, must play a key role. Implementing carbon pricing can encourage renewable energy adoption and technological advancements, while enhancing climate risk monitoring and climate resilience.

Asian nations should intensify efforts to counteract the effects of China’s anticipated growth slowdown and global de-risking trends. This involves reducing trade barriers, improving connectivity, and reinforcing regional integration through agreements such as the ASEAN+3, CPTPP, and RCEP. Such initiatives will help preserve the benefits of trade and economic integration, essential for Asia’s prosperity and continued economic growth.

Photo Caption: Asia has shown great economic resilience, but the region can do more to sustain its growth.