The Asia-Pacific (APAC) region continues to grapple with challenging economic conditions, with prominent concerns revolving around China’s sluggish economic indicators, amplified by increased financing costs in major APAC economies and weakened external demand. Against the backdrop, the risk score for the region remained unchanged over the last quarter at 42.4 out of 100 during the first quarter (Q1) 2023 but higher compared to 42 in Q1 2022, reveals GlobalData, a leading data and analytics company.
In the 20th update version of GlobalData’s “Global Risk Report Quarterly Update – Q1 2023,” which evaluated 32 countries in the APAC region, eight countries were identified in the very low-risk zone, two countries in the low-risk zone, 10 countries under manageable risk, nine countries under high risk and three countries in the very high-risk zone.
Puja Tiwari, Economic Research Analyst at GlobalData, comments: “Although Chinese economy exhibited robust performance in Q1 2023, declining investments, inflation much lower than Central Bank’s target, real estate crisis and alarmingly high youth unemployment rate point towards broader concern which may have a ripple effect on the APAC region.”
On the positive side, India’s resilient performance continues to support the regional growth. The region’s service sector exports are improving with international tourism recovery, benefiting countries like Thailand, Malaysia, Vietnam, the Philippines, and Singapore. Commodity-exporting nations like Australia, Malaysia, and Indonesia also benefit from high global commodity prices, demonstrating the region’s resilience in sustaining economic growth despite external challenges.
Turkmenistan, Myanmar, Pakistan, Laos, and Bhutan remained the highest-risk nations in APAC in Q1 2023 GCRI update. On the other hand, Singapore, Taiwan (Province of China), New Zealand, Hong Kong, Japan, and South Korea were on the list of the top 15 lowest-risk countries worldwide in Q1 2023.
The APAC region faces significant risks, including economic instability and humanitarian crises. In 2023, an estimated 17.6 million people, nearly one-third of the population in Myanmar, require humanitarian assistance, according to the UN.
Pakistan is facing a severe economic crisis characterized by record inflation, soaring poverty, and a scarcity of essential goods like flour. The government’s efforts to distribute free flour have led to chaotic scenes, including stampedes resulting in fatalities. Sri Lanka’s economic crisis led to difficulties in paying for critical imports and defaulting on foreign debt, prompting India to extend a $1 billion credit line until March 2024.
Meanwhile, speculation about a potential Chinese attack on Taiwan has grown, with the US and Taiwanese officials expressing apprehensions about China’s military buildup, suggesting a possible invasion by 2025.
Tiwari concludes: “The APAC region is exposed to risks due to the US monetary policy tightening, elevated inflation, and reduced external demand. Policymakers should prioritize inflation management and public debt stabilization. In the long-term, focusing on structural reforms, innovation, digitalization, and green energy transition will foster sustained growth.”
