Simon Baptist, Chief Economist, Economist Intelligence Unit (EIU) shares latest insights on the global outlook and what this means for the Asia region.
- EIU expects an unspectacular but stable economic growth of 2.3% ahead for 2024. Delayed reaction to monetary tightening raised growth in 2023, but the price of avoided recession is downgrades for 2024.
- Global inflation was at record-high (9.2%) in 2022, the highest since 1996, but will recede to 7.2% in 2023 and 4.6% in 2024. Prices are still high, with food prices still approximately 60% above 2019 levels. Interest rates will (mostly) remain high until mid-2024, making credit expensive for businesses and households.
- China’s economic rebound is fizzling, with the government’s lowball 5% growth target at risk due to property woes, policy missteps, and poor sentiment.
- Increasing competition between the US and China will be the main geopolitical force in the region. Technology will be the main battleground for US-China trade tensions, particularly chips and advanced technology products. The rhetoric will heat-up as the US presidential elections in November 2024 approach.
- China’s share of global real capital allocation has stopped rising, with investment levels off at approximately 30% of the global total, and mostly domestically financed. Around 50% of global investment is in Europe, North America and Northeast Asia, with the share of the latter falling. Meanwhile, South Asia has a tiny, but increasing, share of global investment.
- Upside risks to watch ahead include:
- AI productivity boost
- Xi does a turnaround on economic policy
- Green transition breakthrough
With China’s third Belt and Road forum upcoming on October 17th – 18th, Chim Lee, Analyst, China, Economist Intelligence Unit (EIU) shares insights on what to expect:
- China’s third Belt and Road Forum will likely receive fewer world leaders than previous summits. Attendance from Eastern Europe will drop, as the war in Ukraine affects China’s ties in the region, while the Middle East crisis will affect attendance from that region.
- China’s overseas direct investment is set to grow further in the coming decade, as China’s income and technological capabilities advance and the domestic market matures. Many emerging markets have grown more attractive to such investors over the last decade, because of their natural resources, market size and/or pivotal role in the global supply chain. However, the risk tolerance of Chinese investors has declined. The EIU has ranked 80 investment destinations based on their appeal to Chinese investors in the China Going Global Investment Index.
- The meeting will be watched for indications of China’s approach to its troubled overseas loans. EIU does not expect large-scale debt relief, although key meetings will probably indicate progress on debt negotiations.
Ed. Photo by Aron van de Pol on Unsplash.