 |  |
APEC Growth Outlook Brightens But Risks Linger
Issued by the APEC Policy Support UnitBoosted by consumer and government spending, as well as tourism, the APEC region’s economy is expected to grow by 3.5 percent in 2023 and is projected to sustain growth at 3.2 percent in 2024, higher than earlier estimates, according to the APEC Policy Support Unit (PSU).
The updated report forecasts economic growth to moderate in 2025 to 2.8 percent with global uncertainties continuing to put pressure on economic recovery, in addition to the lagged effects of monetary tightening and scaled-down fiscal support measures that APEC economies have to face.
Presenting the report at the First APEC Senior Officials’ Meeting in Lima, Carlos Kuriyama, director of the PSU, warned that protectionism remains an issue as the number of trade restrictions and remedies increased anew in 2023.
“This is something that we need to really pay attention to, especially those of discriminatory in nature as they have the potential to cause some geoeconomic fragmentation—it is a lose-lose situation for APEC as a region as well as the world,” said Kuriyama.
“However, we are also seeing an uptick in trade facilitation with the number of measures in force enabling trade increasing from 618 in 2022 to 682 in 2023. This is encouraging,” Kuriyama added.
Inflation in the region is going down, reaching 3.0 percent in December 2023 compared to 6.1 percent in December 2022. The report notes that while inflation is declining, interest rate adjustments over the past year have partly influenced exchange rate movement. The currencies of 17 APEC economies depreciated 6 percent on average from February 2023 to February 2024, creating an upward pressure to prices and risking currency mismatch that may affect payment obligations.
“Monetary authorities need to remain on guard as incidents in the Red Sea and the drought in the Panama Canal are affecting shipping routes and freight costs that, in turn, could fuel inflationary pressures—making things more expensive,” said Rhea C. Hernando, an analyst with the PSU.
“These issues have resulted in extended sailing times by one to two weeks, causing container and vessel shortages, as well as potential port congestion,” Hernando added.
Data in mid-January 2024 reveal that composite shipping costs had nearly doubled, reaching the highest level in the past 12 months. While the latest data as of 1 February 2024 indicated some decline, the cost is still significant compared to the level a year ago.
Meanwhile, merchandise trade contracted during the first nine months of 2023 as global demand waned and prices for non-fuel commodities and manufactures fell. Export and import value of merchandise trade fell to -7.5 percent and -8 percent respectively, while the export and import volume of merchandise trade fell to -2.1 percent and 4.7 percent respectively.
“The good news comes from commercial services trade which grew 5.5 percent for export and 9.2 percent for imports,” said Glacer Niño A. Vasquez, a researcher with the PSU. “Although the growth rates are decelerating compared to 2022, we note that travel and tourism as well as some goods-related services such as data services supported this growth.”
The report also highlights how government expenditure is outpacing revenue generation in APEC, with fiscal tightening expected in the short term. However, the report underlines the importance of finding the right balance between rebuilding fiscal buffers to prepare for future shocks and supporting economic activity.
“We need a combination of balanced monetary and fiscal policies, at the same time, we need to strengthen regional cooperation to resolve the current challenges,” Kuriyama concluded.
To read more about the APEC Regional Trends Analysis Update, visit this page.
For further details, please contact:
Masyitha Baziad +65 9751 2146 at mb@apec.org
Michael Chapnick +65 9647 4847 at mc@apec.org
APEC Focuses on Improving the Lives of People in the Region
Issued by the APEC Senior Officials' Meeting
Senior officials from the 21 APEC member economies are meeting in Lima to develop concrete measures covering trade, investment, digitalization and sustainable development that focus on delivering quality growth for people in the Asia-Pacific.
“We are committed to fostering an environment conducive to inclusive and sustainable growth for all member economies,” said Ambassador Carlos Vasquez, the 2024 Chair of APEC Senior Officials’ Meeting.
Ambassador Vasquez reiterated that the thematic priorities set by Peru for this year reflect member economies’ dedication to addressing the critical issues facing the APEC region. These include promoting trade and investment for inclusive growth, harnessing innovation and digitalization for transitioning to the formal economy, as well as advancing sustainable development and resilient growth.
“Each priority responds to critical issues of mutual interest for our economies in the realm of trade and investment,” Ambassador Vasquez added. “We also aim to revitalize discussions around a new view for the Free Trade Area of the Asia-Pacific (FTAAP) and foster greater collaboration to address trade related challenges.”
Nearly 1,500 delegates participated in several meetings in Lima over the last two weeks, deliberating and sharing best practices on how to achieve quality growth in the Asia-Pacific, understanding the urgent need to address current global challenges, as well as future-proofing the region.
At the First APEC Senior Officials’ Meeting held on 7-8 March, senior officials discussed the latest developments in the World Trade Organization (WTO), including the outcomes of the recently concluded 13th WTO Ministerial Conference.
Senior officials expressed support for Peru’s 2024 priorities including the priority to accelerate APEC actions on addressing the informal economy within their economies and reviewing key areas and measures that could be integrated into a roadmap for transitioning to the formal and global economy.
According to the APEC Policy Support Unit’s recent policy brief, the size of the informal economy in the APEC region has been estimated to be 13.4 percent of GDP in 2020, and the median earnings of informal workers in several APEC economies is around 40 to 67 percent lower than those working formally.
“Informality occurs around the world, and as part of our efforts in advancing inclusive growth, Peru, for the first time, has brought this topic to the table,” said Dr Rebecca Sta Maria, Executive Director of the APEC Secretariat.
“Earlier this week, we heard from experts and member economies about their views on how APEC can advance formalization, including by promoting an innovative mix of policies and strategies to develop skills, improving trust in institutions, fostering enabling business environments, increasing access to capital, markets, and technology as well as boosting social protection,” Dr Sta Maria added.
On the occasion of International Women’s Day, Ambassador Vasquez highlighted the continuous work within APEC, not only in recognizing the pivotal role of women in the economy, but also in ensuring their full economic empowerment.
“The full potential of women’s contribution to the Asia-Pacific economy remains untapped. In this sense, women’s economic empowerment and the greater inclusion of women in the digital economy are high on APEC’s agenda,” he said.
Ambassador Vasquez encouraged member economies to keep advancing the La Serena Roadmap for Women and Inclusive Growth, driving policy actions across APEC, fostering inclusive economic growth and promoting women’s active participation in the economy.
“Let us remember that our collective efforts are aimed at improving the lives of people in our region,” Ambassador Vasquez concluded. “It is only through collaboration, innovation and a shared vision for the future that we can overcome the challenges we face and seize the opportunities that lie ahead.”
Senior officials will meet again in May in Arequipa to take stock of the progress of work. Peru will also host the APEC Ministers Responsible for Trade Meeting (MRT) and the first joint MRT and Ministers for Women’s Ministerial Meeting in May.
For further details, please contact:
Masyitha Baziad +65 9751 2146 at mb@apec.org
Michael Chapnick +65 9647 4847 atr mc@apec.org
