Outlook 2022: looking brighter in Asia

The economic outlook for Asia in 2022 looks brighter, as the pace of vaccination across the region reaches a critical threshold that will allow further easing of restrictions. Next year is the Year of the Tiger, and ANZ Research expects some Asian economies to start to roar as the recovery powers on.

We've already seen domestic demand start to pick up. ANZ Research’s forecast is for Asia ex-China and India to see a continued recovery in gross domestic product and growth through 2022.

ANZ Research expects a slight moderation in growth rates through the year, although more of a moderation to trend than anything material. That will allow central banks in the region to continue their policy normalisation. 

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ANZ Research expects south-east Asian economies, badly hit by the pandemic in 2021, to see a stronger recovery in 2022, due to lower base effects from the pandemic. As the economy starts to normalise and activity returns to normal levels, the export sector will benefit.

That's one of the key reasons why Asia is well placed to weather the anticipated US Federal Reserve tightening cycle. ANZ Research expects the Fed to hike twice in the second half of 2022, but such a move should not place any undue stress on Asian financial markets.

There are two major risks to the outlook in 2022. One is the emergence of further COVID-19 variants that could derail the recovery. This remains an unknown, but given governments are now much better placed to handle such activity, ANZ Research hopes this will be less of an issue in 2022.

The other major risk is around inflation. Concerns around high inflation around the world are rising. In Asia, generally speaking, inflation remains contained, and for now ANZ Research does not expect it will reach levels of concern for policymakers.

Khoon Goh is Head of Asia Research at ANZ