APAC rebound will slow into 2023, but not reverse

Despite an Omicron wave at the start of the year, worsening stagflation shocks due to the war in Ukraine, and China’s lockdowns, private consumption growth has been robust across Asia Pacific, according to Oxford Economics.

Unlike most Western economies, real incomes have not declined in Asia. With wage growth outpacing inflation, consumption has been boosted by re-openings and rebounding tourism.

At the same time, governments have stepped up measures to shield consumers from the increase in consumer prices and normalising financial conditions.

Nevertheless, confidence indices are generally trending lower, with Indonesia, India, and the Philippines notable exceptions.

While China’s re-opening will impart a positive impulse to exports in Q3 and support earnings and consumption, Oxford Economics expects momentum to slow thereafter and remain muted in 2023 as the external backdrop weakens considerably. 

In line with this, it forecasts Asia ex-China’s consumption growth to slow to 3.2% in 2023 from 4.6% in 2022.

But in the short term, Asia seems better placed than others. Globally, Asia’s consumption is likely to continue growing at a faster pace than other regions in 2023.