APEC Bulletin 30 May 2023
Uneven Recovery in the APEC Region amid Uncertainty
By Rhea Crisologo Hernando and Carlos Kuriyama
Rising interest rates, unwinding of massive fiscal support and stubborn inflation dampen growth
The global economy continues to grapple with the cost-of-living crisis as relatively high inflation persists while financial sector strains have emerged as monetary policy rates increased. Fiscal space has narrowed as debts surged following massive stimulus measures to preserve lives and livelihoods amid the pandemic. Despite these efforts, income levels have not recovered to pre-pandemic levels in most APEC economies and inequality has widened as the pandemic hit the most vulnerable populations the hardest.
Slow and uneven growth, high inflation
Medium-term projections point to growth hovering between 2.8 to 2.9 percent, the lowest GDP growth in 20 years, excluding the 2008-2009 global financial crisis (GFC) and the pandemic-related economic recession. Tighter financial conditions and narrowing fiscal space resulted in lower GDP growth for the global economy and the APEC region as debts surged amid the pandemic-dampened economic activity. In particular, APEC grew at a slower pace of 2.6 percent in 2022 from 6.2 percent in 2021. Growth is expected to remain uneven, with only nine APEC economies growing above 3 percent in 2023.
Supply-demand imbalances compounded by geopolitical issues put an upward pressure on prices. APEC inflation reached 5.9 percent in 2022 from 2.9 percent in 2021. The inflation outlook has been adjusted slightly upwards to 4.4 percent in 2023, before declining to 2.9 percent in 2024. Most APEC economies have been using monetary policy tools at their disposal, such as implementing interest rates hikes, to stem inflationary pressures.
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