Regional Economic Outlook: Asia and the Pacific, October 2022: Navigating Headwinds
October 27, 2022
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After the strong rebound of 6.5% recorded in 2021, growth in Asia and the Pacific is expected to moderate to 4.0% in 2022 in an uncertain global environment and reach 4.3% in 2023. Inflation exceeded most central bank targets, but is expected to peak in late 2022. As the effects of the pandemic fade, the region faces further headwinds from global financial tightening and an expected slowdown in external demand. While Asia remains a relative bright spot in an increasingly sluggish global economy, it is expected to grow at a rate well below the 5½% average rate seen over the previous two decades. Policy support is gradually being withdrawn as inflation rises and spare capacity is used, but monetary policy should be ready to tighten more quickly if the rise in core inflation proves more persistent. The region’s rising public debt levels call for continued fiscal consolidation, so interventions to mitigate global food and fuel shocks must be well-targeted, temporary, and fiscally neutral. Structural reforms are needed to boost growth and mitigate the expected scars of the pandemic, in particular by compensating for lost schooling through investments in education and training, promoting diversification, tackling debt overhang due to pandemic and harnessing digitalization. Strong multilateralism, including through international organizations, the Group of Twenty and regional processes, will be needed to mitigate geo-economic fragmentation and achieve much-needed progress on climate change commitments.