APEC growth improves, trade expected to grow slightly in 2023

Though uneven, growth in the Asia-Pacific Economic Cooperation (APEC) region is improving, with an expected growth of 3.3 per cent this year compared to 2.6 per cent last year, an APEC report said.

Inflation in the region fell to 3.4 per cent in September compared to 6.6 per cent in the same month last year. The region's trade contracted in 2023 first half.

Economic growth in the Asia-Pacific Economic Cooperation (APEC) region is showing signs of improvement, with an expected growth of 3.3 per cent this year compared to 2.6 per cent last year, according to the latest APEC Regional Trends Analysis report.

The report, released by the APEC Policy Support Unit based in San Francisco, noted that a rebound in tourism and domestic consumption is driving economic activity.

However, the legacy of the pandemic, inflation, higher debt, climate change, trade protectionism, geopolitical tensions and economic fragmentation continue to overshadow outlook.

“There are promising signs in APEC, but it is walking a tightrope amid downside risks,” said Carlos Kuriyama, director of the Policy Support Unit.

“Economic growth in the region remains uneven though we are looking at a more stable economic growth in the years ahead,” added Kuriyama.

Inflation in the region declined to 3.4 per cent in September this year compared to 6.6 per cent recorded during the same period last year.

The report noted an uptick in recent months and cautioned that inflation may aggravate the region’s economy especially as export restrictions, issues with the fertilizer supply chain and weather conditions are affecting some agricultural products.

“To fight stubborn inflation, many APEC economies have been tightening monetary policy by raising interest rates,” said Rhea C. Hernando, analyst with the Policy Support Unit and co-author of the report.

“High inflation not only causes higher living costs, but it also leads to increased interest rates and amplified uncertainty, which impact investment and consumption as well as debt sustainability. These in turn could weaken the post-pandemic economic recovery,” Hernando added.

As a result of a tighter monetary environment around the region, trade suffered a contraction in the first half of 2023, with the volume and value of exports declining to minus 3.5 per cent and minus 7.1 per cent respectively.

“Merchandise trade export and imports are expected to grow slightly by 0.1 per cent and 0.3 per cent respectively in 2023 with a more optimistic growth projection for merchandise trade in 2024 and 2025 at 4.3 to 4.4 percent,” said Glacer Nino A. Vasquez, researcher with the unit and co-author of the report, in an APEC release.

The report further underlined that the future of trade in APEC is clouded by geoeconomic fragmentation and the accumulation of trade-restrictive measures, including trade remedies.

Shifting demographics will also pose a challenge to the region’s economy as the population is getting older and birth rates are falling. This means that workers will have to face a greater burden in supporting a growing elderly population.