GDP growth in Asian countries will decrease to 4.5% in 2024
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The slowdown in the global economy will also affect Asian countries – growth rates in the region will drop to 4.5% next year versus 5% this year, according to the updated World Bank forecast. Acceleration this year will only ensure recovery growth in China after the lifting of Covid restrictions, but trade statistics are already recording a pronounced weakening of external demand – merchandise exports have decreased by 10-20% from their peak in the second quarter of 2022. China also faces domestic constraints, including problems in the real estate market and a high debt load.
Growth rates in developing countries in Asia will begin to decline in the second half of this year and will slow to 4.5% next year (versus 5% in 2023), according to the World Bank’s updated macro forecast for East Asia. At the same time, in China the growth rate will be 5.1% (versus 3% in 2022), in other countries – 4.6% versus 5.8% a year earlier (due to the size of the economy, a decrease in China’s GDP growth by 1% is equivalent to a decrease growth of the entire region by 0.3%).
In 2024, on the contrary, the overall recovery of the global economy will support growth in the region – it will accelerate to 4.7%, but in China the growth rate will be limited by internal problems (including the state of the real estate market and the growing debt burden) and may amount to only 4.4%. . The previous growth model, focused on supporting investment in infrastructure and real estate, led to increased burden on companies and regions: the total debt of the non-financial sector has more than doubled since 2007 – from 132% to 285% of GDP, which also limits private sector capital investment , indicate in the World Bank.
Meanwhile, weakening external demand significantly affected the exports of countries in the region: goods supplies from Indonesia and Malaysia decreased by 20% from their peak in the second quarter of 2022, and from China and Vietnam by 10%. At the same time, increased tariffs imposed by the United States on China in 2018 (during the “trade war” between the United States and China initiated by Donald Trump) have already affected the transfer of supplies from China to other countries in the region. Moreover, the package of measures to support high-tech manufacturers in the United States (CHIPS and Science Act, Inflation Reduction Act, the allocation of subsidies is tied to localization requirements), already initiated by the Joe Biden administration and approved in August 2022, also affected both supplies from China and from other ASEAN countries – exports from Canada and Mexico increased slightly (the new requirements do not apply to them).
In the second quarter of this year, the quarterly growth rate of the Chinese economy slowed to 0.8% after recovering due to the lifting of Covid restrictions (2.2% the previous quarter). However, data from the National Bureau of Statistics of the People’s Republic of China indicate some revival of business activity in the country. Thus, for the first time in six months, the PMI index of the Chinese manufacturing sector was in the positive zone – above the 50 point mark that separates the growth of business activity from its decline: in September the indicator was 50.2 points after 49.7 points in August. The new orders subindex rose to 50.5 points from 50.2 points a month earlier. The highest value for six months was the September value of the output indicator: 52.7 points (51.9 points in August) – the indicator has been growing for the fourth month in a row. The service sector PMI also remains above the 50 point mark – 51.7 points in September after 51 a month earlier.
Previous August data also indicated a slight acceleration in the pace of economic recovery in China. Let us note that the improvement in indicators in August and the growth of leading indicators in September are a consequence of the measures deployed by the authorities to support the economy (see Kommersant on September 1), although for now we are talking about the revival of domestic, not external demand. The PRC export orders subindex still remains in the negative zone (47.8 points in September after 46.7 in August). The weakness of external demand is explained primarily by the state of consumption in developed countries (and the tightening of lending conditions against the backdrop of rate increases by leading central banks). Let us note that, as follows from S&P Global data published yesterday, the European PMI in industry decreased in September to 43.4 points after 43.5 points in August.
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