The economic situation in Asia and the Pacific as of mid-2024

The United Nations Economic and Social Council (ECOSOC) will meet in July 2024 in New York and will consider inter alia a report entitled World economic situation and prospects as of mid-2024.

An encouraging picture

The general assessment of the world economic situation is a moderate optimistic one.The report mentioned above, which has 30 pages, opens with the following paragraph :" The global economic outlook has improved since January, with major economies avoiding a severe downturn. The world economy is now projected to grow by 2.7 per cent in 2024, instead of the 2.4 per cent forecasted earlier, on the back of better-than expected performance of the economy of the United States of America and some improvement in the outlook for several large emerging economies. The modest gain in the growth momentum is partly offset by downward revisions of the growth outlook for the European Union, Africa and Western Asia. On balance, the near-term economic outlook is only cautiously optimistic, as economic vulnerabilities remain amid persistently high interest rates, continuing geopolitical tensions and increasing climate risks."

We will summarize the information and the comments related to Asia which is mentioned 11 times in the report under consideration.We will respect the original terminology of the report and remind that it contains data and information officially transmitted to the UN Secretariat by the UN Member states.

The first substantive reference to Asia and the Pacific appears in a context according to which it is found that in Asia and the Pacific young people face major barriers to entering the labour market, with unemployment rates averaging above 13 per cent. Furthermore, the number of young people not in education, employment or training remains elevated in Asia and the Pacific. The rates of young women not in education, employment or training are especially high in South Asia.

The area called developed Asia and the Pacific is analyzed separately in the report.It is reminded that the GDP growth projection for Japan for 2024 remains unchanged from the forecast in January, at 1.2 per cent, down from 1.9 per cent in 2023. In March 2024, the Bank of Japan ended its negative interest rate regime by raising the policy rate for the first time since 2007, signalling the economy's exit from a deflationary state. While corporate profits and business confidence have improved, private consumption is projected to remain weak as consumer confidence has been slow to recover amid slow nominal wage growth.

In the same context, it is assessed that the 2024 growth projections have been revised slightly up for Australia (from 1.5 per cent to 1.6 per cent) and revised down for the Republic of Korea (from 2.4 per cent to 2.2 per cent). Although inflation rates have declined significantly, the Reserve Bank of Australia and the Bank of Korea remain cautious about shifting to monetary easing owing to uncertain inflation prospects. In Australia, rapid nominal wage growth indicates continued upward pressure on the price level.

Turning to other Asian areas, the report adds that Azerbaijan and Kazakhstan are set to gain from the increase in oil prices since the start of 2024. Other economies of the Caucasus and Central Asia are benefiting from the relocation of Russian businesses and growing re-export opportunities to the Russian market. However, the planned tightening of the rules for employing migrant workers in the Russian Federation will likely reduce remittance flows and create pressures in domestic labour markets.

Special attention is paid to East Asian economies which are forecast to grow by 4.6 per cent in 2024 and 4.5 per cent in 2025 (unchanged from the forecasts in January), compared with 4.8 per cent in 2023. The explanation of this growth is cogent.This solid economic performance has been underpinned by robust domestic demand and continued recovery in tourism, alongside merchandise exports showing signs of improvement.

It is, however, stressed that there are several downside risks to the outlook, including higher-for-longer policy rates in major developed economies, escalating geopolitical tensions and growing climate risks.

The economy of China is described separately, announcing a forecast to grow by 4.8 per cent in 2024 and 4.5 per cent in 2025, moderating from 5.2 per cent in 2023. Key challenges remain in the property sector. Despite measures to stabilize the sector, the declines in property investment and sales continued in the first quarter of 2024. While global trade improvements buoyed Chinese exports in early 2024, lingering trade tensions could continue to suppress external demand for Chinese goods. Yet, accommodative monetary and proactive fiscal policies are expected to support economic output in the near term. In the longer term, the Chinese Government's emphasis on high-quality growth implies sustained policy support to boost industrial production and manufacturing investment, in particular in emerging sectors.

How about other economies in the Asian region and the Pacific? The report affirms that they have been broadly resilient, albeit with considerable cross-country variation. Private consumption has been a major driver of growth, supported by lower unemployment and rising incomes. Export-oriented East Asian economies, namely Malaysia, Singapore, Viet Nam and Taiwan Province of China, have seen signs of trade recovery since late 2023, especially in exports of electronic products. As international tourism recovery continues, East Asian countries, in particular small island developing States in the Pacific, are expected to see an increase in tourist arrivals and higher service exports. Average inflation has remained elevated in several smaller economies, such as the Lao People's Democratic Republic and Myanmar. However, easing inflationary pressures in the region have allowed many central banks to pause monetary policy tightening or even cut policy rates, for example, in Viet Nam. Policy rates in most economies are expected to gradually decline, depending, to some extent, on the decisions of the United States Federal Reserve.

An exceptional outlook for South Asia is expected for its economies which will remain strong, supported by a robust performance of the economy of India and a slight recovery in Pakistan and Sri Lanka. Regional GDP is projected to grow by 5.8 per cent in 2024 (an upward revision of 0.6 percentage points since January) and 5.7 per cent in 2025, below the 6.2 per cent recorded in 2023. It is noted, however, that still tight financial conditions and fiscal and external imbalances will continue to weigh on growth performance in South Asia. In addition, potential increases in energy prices, amid geopolitical tensions and the ongoing disruption in the Red Sea, pose a risk to the regional economic outlook.

It is anticipated that the economy of India will expand by 6.9 per cent in 2024 and 6.6 per cent in 2025, mainly driven by strong public investment and resilient private consumption. Although subdued external demand will continue to weigh on merchandise export growth, exports of pharmaceuticals and chemicals are expected to expand significantly.

Across South Asia , average consumer price inflation is projected to fall from 13.9 per cent in 2023 to 10.5 per cent in 2024 and 7.4 per cent in 2025 as currency depreciation pressures ease and agricultural commodity prices moderate following the expected weakening of El Niño. Consumer price inflation in India is projected to decelerate from 5.6 per cent in 2023 to 4.5 per cent in 2024, staying within the 2 to 6 per cent medium-term target range of the central bank. Similarly, inflation rates in other South Asian countries declined in 2023 and are expected to decelerate further in 2024, ranging from 2.2 per cent in Maldives to 33.6 per cent in the Islamic Republic of Iran. Despite some moderation, food prices remained elevated in the first quarter of 2024, especially in Bangladesh and India.

A special case

Western Asia represents a special case in the report under review. Against the backdrop of extended oil production cuts, escalating geopolitical tensions and trade disruptions in the Red Sea, Western Asia faces a challenging short-term economic outlook. Average GDP growth is projected to recover from an estimated 2.0 per cent in 2023 to 2.7 per cent in 2024 and 4.2 per cent in 2025. In member countries of the Cooperation Council for the Arab States of the Gulf, economic growth has been held back by lower oil prices and reduced oil production, adversely affecting government budgets in Kuwait and Saudi Arabia. In contrast, Qatar and the United Arab Emirates – where economic diversification efforts have been more successful – saw fiscal revenues increase in early 2024.

In Türkiye, economic growth is projected to slow down from 4.5 per cent in 2023 to 3.2 per cent in 2024. The rapid devaluation of the Turkish lira added to inflationary pressures, pushing monetary authorities to resort to tightening measures. Amid softening domestic demand, which also led to reduced imports, the current account deficit narrowed in early 2024.

Inflation is projected to gradually ease across the region. In Lebanon, the Syrian Arab Republic and Türkiye, high levels of inflation persist, whereas in Jordan, Oman and Qatar, inflation has decelerated significantly. Following the United States Federal Reserve, central banks in the member countries of the Cooperation Council for the Arab States of the Gulf are expected to maintain tight monetary policies to sustain their dollar pegs. Monetary easing is expected in the second half of 2024 in Jordan and Türkiye if inflationary pressures ease.

The report describes the effects of the war in Gaza which have been widespread in the region. The economy of the State of Palestine is estimated to have contracted by 30 per cent in the fourth quarter of 2023 amid an 81 per cent output decline in the Gaza Strip. The consumer price index for February 2024 increased by 27.2 per cent in the State of Palestine and by 118 per cent in the Gaza Strip, reflecting an acute cost-of-living crisis. In Israel, GDP growth slowed from 6.4 per cent in 2022 to an estimated 2 per cent in 2023 as private consumption and real estate investment sharply contracted and exports declined moderately.

Non-oil producers in the region are suffering considerable spillover effects. The tourism sector has been hit, with Jordan and Lebanon experiencing sizeable declines in arrivals. The conflict at the southern border of Lebanon has affected 30 per cent of the country's agricultural output, raising concerns about food security in the near term.

Conclusion

The consideration of the above-presented report is expected to encourage speakers from the 54 ECOSOC member states and observers to confirm, supplement, and refine the document's content using additional information from official sources.

Furthermore, ECOSOC's deliberations are anticipated to be influenced by the consultations and negotiations dedicated to finalizing the Pact for the Future, which is slated for adoption at the United Nations Summit of the Future in New York on September 22-23, 2024.

Currently, the 20-page draft (63 paragraphs) is undergoing revisions with the participation of the 193 UN member states.

It is hoped that the final official draft to be approved by the Summit will maintain its focus on the stated priority: renewing people's trust in global institutions by making them more representative of today's world and more effective in delivering on their commitments. The existing text emphasizes the need to restore faith in global governance through principles of trust, equity, solidarity, and universality. The Summit aims to renew commitments to international cooperation, striving for a transformation of global governance and strengthening the multilateral system to achieve a safer, more peaceful, just, equal, inclusive, sustainable, and prosperous world. All these aspirations are articulated in the draft Pact for the Future, which promises to be the most significant UN diplomatic document of 2024.