Asian Economic Outlook

By Frank-Jürgen Richter

November 11, 2022

Asia has witnessed rapid economic development since the past few decades. The Chinese economic reform or—as popularly known in the US—the opening of China in the early 1990s, ensured China gained an economic superpower status, and is now en route to becoming the world’s largest economy. China’s GDP stands at around US$17,734 billion in 2021, while that of the US is US$22,996 billion.

Like China, other economies such as India, South Korea, Indonesia and many others in the region have seen substantial economic development since the dawn of the decade. The onslaught of the pandemic in 2020 slowed all these developments and also threatens to derail a lot of progress achieved thus far.

Spurred by the economic development, the region also witnessed reduction in poverty, coupled with reduction in malnutrition and hunger. But these developments are all impacted by the massive disruptions of the pandemic.

Asia is at a turning point, where it will need to take some hard decisions about reopening its economy, while ensuring COVID-19 cases are kept at bay. Easier said than done considering China’s zero-COVID policy that threatens the glory run of the region, coupled with COVID-19 variants that keep emerging at regular intervals in the region.

Asia is faced with many questions about its future. This forms the crux of one of the themes being discussed at the upcoming Horasis Asia Meeting, being held between 20 to 21 November in Kitakyushu, Japan. The event will host 400 of the foremost business and political leaders from across Asia and the world, as they discuss ways to revitalize Asia’s economy in building a resilient post-COVID Asia.

War and Inflation

Asia also faces the impacts from the Russia-Ukraine war. The war has led to an increase in food prices, particularly wheat and corn and also oil prices. Russia is one of the largest exporters of oil and gas to the world. Western-led sanctions on the country has led to shortage of oil supply in Asia. The supply chain impacts, influenced by COVID-19, coupled with the war has inflicted a double-whammy on the region. Oil prices in Vietnam hovered below US$1 per liter. This amid the pandemic and the debacle of war rose up to more than US$1.3 per liter.

Russia and Ukraine are the world’s leading exporters of wheat and corn. The conflict quickly spread to the Black Sea, which is a vital trading route for grains such as wheat and corn. Around March 2022, hundreds of ships carrying grains were stopped from departing the Black Sea by Russian forces, claiming of high risk due to sea mines, laid down by the Ukrainian Navy.

Other than the losses in terms of shortage of a critical ingredient, considered a staple in most economies in Asia, Ukraine also stands to lose around US$6 billion in grain exports if sea ports remained closed. The conflict also threatens to disrupt the sowing campaigns in Ukraine, leading to further shortage of grains. “Ukraine has enough grain and food reserves to survive for a year, but if the war continues … (it) will not be able to export grain to the world, and there will be problems,” said Ukraine Presidential Adviser Oleh Ustenko.

Zero-COVID and Geopolitical Worries

China’s zero-COVID stance has dealt a severe blow to global value chains, particularly the Asian ones. Prolonged lockdowns and stoppage of any trade movement in China has led to severe shortages in products and raw materials that other countries depended on.

This situation has further fueled the call for reshoring among many multinational companies that have set base in China. The US-China trade war, coupled with the disruptions in supply chains and now China’s stringent zero-COVID measures have pushed many US companies to reshore.

Asia’s support to Russia in the war is also mixed. Countries such as China and India, although not open, are not confronting Russia’s invasion and human rights crimes in Ukraine. Japan’s relations with Russia has since soured. Japan’s Prime Minister Kishida Fumio has condemned Russia’s invasion of Ukraine, calling for a diplomatic solution. He said, “rather than changing the status quo by force Russia should pursue a solution through negotiations that is acceptable to the international community.”

Future Ahead

Despite the health, economic and geopolitical impacts the region is facing, developing economies in Asia are expected to register growth. According to the Asian Development Bank’s recent outlook, developing economies in Asia are expected to register economic growth of 4.3% in 2022 and 4.9% in 2023, despite the intermittent COVID-19 lockdowns, rising inflation and the Russia-Ukraine war.

Governments in the region are also announcing several stimuluses to drive investments in infrastructure and industries to spur growth and robust recovery.

The Horasis Asia Meeting follows on the heels of the Horasis India Meeting, held between 25-26 September 2022 in Vietnam. The India Meeting was attended by 400 leaders from both the business and government diaspora. To learn more about the event, click here.

Photo Caption: Aerial view of a container ship crossing a bridge in Hong Kong.