The economies of the Pacific Rim in the doldrums, undermined by inflation and war

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By ELAINE KURTENBACH, AP Business Writer

BANGKOK (AP) — Economies in the Asia-Pacific region are expected to slump this year as decades-high inflation and war in Ukraine heighten geopolitical uncertainties and the aftermath of the pandemic.

A report on Pacific Rim economies by the Asia-Pacific Economic Cooperation forum said on Friday that growth in the region is likely to more than halve this year to 2.5% from 5.9% last year, as many countries recovered from the worst of their COVID-19 outbreaks.

Weaker growth in the United States and China is a major factor in the regional malaise, although other economies are also slowing. Russia’s economy is expected to shrink due to the implications of its war in Ukraine, and the three economies account for nearly 70% of GDP in the APEC region, according to the report.

The report predicted that regional growth would pick up only slightly in 2023, at 2.6%.

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Most economies in the region are only just beginning to fully emerge from border closures and other pandemic-related precautions. Tourists have reappeared on the streets of Bangkok, but many businesses remain closed, victims of the many months when travel has been virtually paralyzed.

In China, where authorities are still imposing lockdowns to eradicate COVID-19 outbreaks, the economy contracted 2.6% in the three months to June from the previous quarter after the Shanghai lockdown. and other cities to fight coronavirus outbreaks.

The US economy contracted 0.9% in April-June, while Russia’s economy shrank 0.5% in January-June from a year earlier, according to its Economic Development Ministry.

The Japanese economy contracted at an annual rate of 0.5% in January-March and is expected to grow only 2% in the fiscal year ending March 2023.

Some economies are doing better.

Indonesia reported on Friday that its economy grew at a better-than-expected 5.4% annual rate in the April-June quarter as it rebounded from a wave of omicron-variant coronavirus infections.

An exporter of raw materials such as coal and palm oil, the country saw its exports jump nearly 20% in the last quarter as prices for many materials soared. But that windfall is likely to dissipate as price increases ease or reverse, analysts said.

“We expect slowing growth in the rest of the world to take its toll…as commodity prices continue to fall. On the domestic front, headwinds from high inflation, which has reached a high in seven years and is expected to increase further in the coming months, are multiplying,” said Alex Holmes of Oxford Economics in a commentary.

India is also growing faster than most of the rest of the region.

Reserve Bank of India Governor Shaktikanta Das expected growth to remain robust at 7.2% in the fiscal year ending March 2023. But to counter inflation which hit 6.7% in June, the central bank on Friday raised its key rate by half. percentage point to 5.4%.

More than half of APEC’s 21 members raised rates or tightened monetary policy to counter inflation, which now averages 5.4% for the region, according to the APEC report.

He pointed to an overall 23% increase in the UN Food and Agriculture Organization’s food price index, noting that inflation is expected to remain high for at least the rest of the year as that central banks adjust their policies to try to control it. .

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