China's reopening should provide a timely boost to the Asean+3 region as the area's economic growth was downgraded because of continuing weakness in China, Japan and South Korea, according to economists.
In its January update, the Singapore-based Asean+3 Macroeconomic Research Office (Amro) trimmed Asean+3 growth for 2022 to 3.3% from a projection of 3.7% made in October last year, citing "much weaker" growth in China and continuing weakness in Japan and South Korea.
The growth outlook for 2023 was also cut because the global economy is projected to expand at a more lacklustre pace, with manufacturing activities in the US and Europe continuing to weaken. Lower external demand will lead to more moderate growth in Japan and South Korea.
"The weakening global environment has taken the wind out of the sails of the region's external trade momentum. The drag on economic activity from aggressive monetary policy tightening in the US and the euro zone will be felt more fully this year, translating to softer export orders for Asean+3," said Amro chief economist Hoe Ee Khor.
Growth in the Asean region is still buoyed by strong domestic demand, prompting the office to upgrade the region's economic growth forecast for 2022 to 5.6% from an earlier projection of 5.3%.
Growth in the Asean+3 region is projected to strengthen this year to 4.3%, as China's economy is expected to rebound strongly, reflecting the removal of containment measures and reopening of its economy.
"With recession risks still haunting the US and Europe, China's economic reopening cannot come at a better time for the region," said Mr Khor. "The ongoing resumption of tourism, especially the return of Chinese tourists, will provide a much-needed boost to growth. China's stronger economy will provide support for regional activity, while the border reopening will boost intra-regional tourism."
Inflation is moderating across Asean+3, tempered by sustained policy tightening by central banks and easing global supply chain bottlenecks.
As global energy and food prices come down, inflation is expected to dip to 4.5% in 2023 from a projected 6.3% last year, he said.