Stable growth will continue in Asia
― Supply chain restructuring due to an “Exodus from China” could be a tailwind for economies in ASEAN and India ―

Asian economies continued to recover in 2022. China’s economic growth will likely remain sluggish, while ASEAN and India may maintain higher growth, as the normalization of economic activities should continue. We expect stable growth in 2023, especially in ASEAN and India, driven by 1) robust growth of goods exports, 2) the recovery of inbound tourism, and 3) solid domestic demand.

Stable growth in ASEAN and India and a prolonged slowdown in the Chinese economy are expected to accelerate supply chain restructuring. For ASEAN and India, the trend of an “Exodus from China” by global companies could be an opportunity to boost their long-term growth. However, Asian economies should be wary of the risk that capital outflows could accelerate further if twin deficits and high inflation intensify.

In China, the economy is rebounding after bottoming out in Q2 2022, when activity restrictions were tightened. However, economic growth is likely to slow sharply to +3.3% in the full year of 2022, well below the government's target of around 5.5%. We expect the growth in 2023 to remain low at +4.9%, due to a slow recovery after the zero-COVID policy, a depressed real estate market and intensifying U.S.-China conflict.

India's economy will likely to grow by +6.5% in FY 2022 as economic activity continued to normalize despite the downward pressure from inflation. Although the pace of economic expansion will slow, we expect the economy to continue growing stably at +5.8% in FY 2023.

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