Despite the current challenges of monetary tightening and subpar global growth, a resilient Asia will be the main driver of global economic growth in 2023, predicts the annual outlook of the London-based think tank Asia House. Strong domestic demand will drive the region’s economy forward. According to Asia House’s economic preparedness indicators, green finance and digital transformation are improving this year.
The exceptions were declines in Japan (for green finance) and India (for both).
Due to global inflation, central banks are now more concerned with restoring price stability than spurring economic growth. As a result, the prospects for Asia would be significantly harmed by a faster rate of global monetary tightening.
Despite China’s anticipated slow growth in 2023, the report stated that Asia will likely prove resilient provided financial and investment flows are focused on digital and green innovation to support sustainable growth and investment.
The pace of digital development in South East Asia is expected to pick up this year, however China, India, and Indonesia’s prospects are less promising due in part to delays in the development of Industry 4.0.
Rising borrowing prices, excessive debt levels, and decreased global liquidity may cause periodic flare-ups in financial instability. Risks include uncertainties in China and the possibility of monetary policy mistakes.
In most nations, COVID-19’s overall economic impact will be less of an issue than it was in 2020 and 2021. Even with the lowering of the zero COVID-19 strategy, it is likely to continue in China.
According to the paper, China is likely to strike a compromise between the competing pressures of preserving economic development, implementing stimulus measures to boost domestic consumption, and enhancing health care capacity in the post-zero-COVID transition.
The report includes a number of recommendations, but the ones that are most important to implement are those that emphasise innovation in order to promote carbon pricing, minimise green premiums for zero-carbon alternatives, and advance underfunded and high-impact projects with blended funding.
