PART 1_V3

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PA R T 1 : T H E E CONOM Y

ECONOMIC GROWTH

Putting these factors together, the global economy has entered choppier waters and the growth outlook has been revised downwards by approximately USD1.3trn in 2022 since the start of the year. At the regional level, growth in Europe has been revised downwards substantially, accounting for two-thirds of global total, with North America accounting for a further 20%. More positively for the Asia Pacific region is that the outlook for many markets remain relatively unchanged from the start of the year. In part this has been due to ongoing strong demand for goods produced in the region despite the obvious global headwinds and that

domestic consumption remains buoyant across most markets with the lifting of domestic movement restrictions and reopening of international borders. The extent to which this situation continues, i.e. robust regional economic growth, is somewhat dependent on China and the strength of its rebound from the current movement restrictions which have started to dent intraregional trade. This remains a critical indicator going forward. At the sub-regional scale New Zealand and India have seen the greatest downwards revisions to 2022 growth since the start of the year. The former is predominantly due to lower demand in

China for dairy products together with the aggressive rate hikes of the RBNZ which could push rates into restrictive territory at around 4% (according to recent policy announcements), though these negative effects maybe partially offset later in the year by increased international tourism. Similarly, inflation in India has increased dramatically of late, which will likely see the RBI also turn more aggressive in its approach and therefore likely to stymie growth. Lastly Singapore’s growth outlook has been dented as global supply chains and therefore global trade, upon which the city-state is highly dependent, have come under greater stress.

Elsewhere the impacts are more benign so far and indeed Australia, Malaysia and Indonesia have received a modest boost from increasing commodity prices. However, this should be tempered with a more uncertain outlook both globally and regionally over the coming months. Greater clarity could be restored if central banks can walk the tightrope of policy normalisation and successfully tame inflation without having too deleterious effects on their national economies, but they will need to simultaneously clearly signal their intentions every step of the way.

FIGURE 5: 2022 GDP OUTLOOK BY FORECAST VINTAGE (FEBRUARY VS JUNE)

2% 3% 4% 5% 6% 7% 8% 9% 10%

More positively for the Asia Pacific region is that the outlook for many markets remain relatively unchanged from the start of the year.

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February

June

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