Asia-Pacific economy in better position, still in recovery mode — Moody’s Analytics
21 Jul 2022
The economy in the Asia-Pacific (APAC) region is in a better position, with many countries still in expansion or recovery mode from the pandemic.
In a research note today, Moody’s Analytics said, however, if conditions outside of the APAC region continue to deteriorate, recession risks will increase, particularly as exports are a critical growth driver, with the United States and Europe important sources of demand.
“Moreover, central banks in Asia are stepping up monetary policy tightening, which will increasingly pressure improved domestic demand,” it said.
It said that given the heightened risk of recession, it is not surprising that global businesses have become more anxious. The weekly Moody’s Analytics business survey confirmed that sentiment has been deteriorating since early 2022.
“There is not always a strong causal link between sentiment and the real economy. With so much thrown at households and businesses over the past two years, there is heightened risk that this ongoing anxiety will contribute to a deterioration in hiring, investment and spending.
“This concern has increased weight — business expectations for economic conditions six months ahead are expected to deteriorate markedly and are at the lowest level since the global financial crisis in 2009,” it added.
Meanwhile, in the separate note, Moody’s Analytics said total debt-to-gross domestic product (GDP) ratios across the APAC region have remained well above pre-pandemic levels, although some countries such as Singapore, Malaysia and Indonesia record lower debt ratios in 2021 compared with 2020.
It said this was due partly to the success of containing domestic COVID-19 cases while keeping production lines open.
On the household debt, it said the government fiscal policies across Southeast Asia have offered support to stabilise household debt in 2021.
“However, the household debt-to-GDP ratios in Malaysia and Thailand remain among the highest in Southeast Asia and are at risk of non-performance as interest rates normalise.
“Elevated household debt remains a major problem despite a recent slowdown in the pace of household debt growth and many Southeast Asian countries are also facing skyrocketing housing prices as hot money and speculation continue to push up prices,” it said.