The economic growth among the Asia-Pacific Economic Cooperation (APEC) countries is anticipated to decline, remaining below the global average. This downturn can be attributed to various factors, including the high interest rates slowing down the growth in the United States, sustained recovery in China, and the trade tensions between the two nations hindering commerce.
Ahead of the APEC Leaders Summit in San Francisco, the Policy Support Unit of APEC Secretariat released its latest forecasts, indicating a decrease in the growth rate for the 21-member region from 3.3% in 2023 to 2.8% in 2024.[i]
It is expected that the Gross Domestic Product (GDP) growth rate of APEC will persist below the global average of 3.2% and the rest of the world’s 3.5-3.6%, averaging around 2.9% in 2025 and 2026. Notable downward risks for the Pacific coastal region encompass enduring inflation associated with weather conditions driving up prices of rice and other agricultural products, coupled with disruptions in the fertilizer supply chain. Additional tightening of monetary policies might be necessary to control inflation, potentially further decelerating growth.[ii]
The causes of this decline are primarily outlined as the high interest rates impacting U.S. growth, sustained growth in China, and ongoing trade tensions between the U.S. and China.
Following a relatively stagnant year in 2023 due to China’s subdued growth, it is anticipated that the volume of trade in goods among APEC countries will rebound next year, with a 4.3% increase in exports and a 3.5% rise in imports. However, the growth in both exports and imports is forecasted to peak in 2025 at 4.4%, subsequently experiencing a slight decline in 2026 due to geopolitical fragmentation disrupting longstanding supply relationships.[iii]
Carlos Kuriyama, Director of the Policy Support Unit at APEC, emphasized the importance of reconciling differences between the U.S. and China following years of trade competition and export restrictions stemming from national security concerns. Notably, President Joe Biden of the U.S. and President Xi Jinping of China met face-to-face for the first time a year after their last meeting on November 8, 2022.[iv]
Kuriyama highlighted that national security-oriented export controls and other limitations between the U.S. and China have increased costs within optimized supply chains for productivity pre-COVID-19. While a complete return to pre-COVID-19 trade models may not be feasible, avoiding further fragmentation is crucial.
The data underscores the significance of the “re-engagement, de-risking, and avoidance of decoupling between the U.S. and China economies.” Kuriyama opined, “I believe a stable relationship between the U.S. and China is a win-win situation for everyone.”
In conclusion, the economic growth forecasts for APEC countries are poised to decline in the coming years due to various internal and external factors. High interest rates, the slowdown in U.S. growth, stable growth in China, and U.S.-China trade disputes stand out as primary limiting factors. Additionally, risk factors such as export restrictions, weather conditions, and supply chain issues could exacerbate the challenges faced by the region. In this context, appropriate policy measures may be necessary for APEC countries to stimulate and sustain economic growth. Moreover, stabilizing relations between the U.S. and China and fortifying supply chains will be crucial for the region’s economic future.
[i] “APEC’s Growth to Slow as Persistent Inflation, US-China Tensions Weigh-Report”, Reuters, https://www.reuters.com/world/asia-pacific/apecs-growth-slow-persistent-inflation-us-china-tensions-weigh-report-2023-11-13/, (Date of Accession: 13.11.2023).
[ii] Ibid.
[iii] Ibid.
[iv] Ibid.
