Apec Summit 2022: Bracing for recession, striving for recovery

Experts expect two major outcomes from the summit: a plan to prepare for recession and the outlines of a path to recovery.

Today's uncertainties and geopolitical tensions are no longer the responsibility of a single country or region. Hence, experts say that countries must engage face to face to find solutions together to the deepening problems afflicting the world.

Ndiame Diop, World Bank country director for Brunei, Malaysia, the Philippines, and Thailand, said the global economy is currently dealing with overlapping crises.

Just as countries began to recover from the pandemic and reduce policy support, the world was confronted first with Russia’s invasion of Ukraine, then inflation, and now financial tightening as interest rates ratchet up.

Though these crises originated in different parts of the world, their impact has been global. World economic growth is projected to decline to 3.2% in 2022 and to 2.7% in 2023, from 6% in 2021, with poor and vulnerable countries bearing the brunt of the impacts.

Developing countries of East Asia and the Pacific, including Thailand, will not be immune to the global slowdown and fiscal tightening.

"Our latest economic update released in late September projects regional growth will decline from 7.2% in 2021 to 3.2% in 2022 and recover somewhat to 4.6% in 2023," Diop said.

The risk of a global recession in 2023 is rising, according to the World Bank, International Monetary Fund (IMF), Asian Development Bank (ADB), and many other leading institutions, as central banks implement simultaneous interest-rate increases to combat inflation.

However, the expected trajectory of interest-rate increases and other policy actions may not be sufficient to return global inflation to pre-Covid levels. Global inflation, which is currently at a 14-year high, is expected to remain above target ranges in the vast majority of advanced and developing economies until 2023.

Diop pointed out that the way governments respond to today’s challenges will also shape development in the long term. Governments need to act on two fronts, he added.

They must mitigate the major risks while at the same time seizing the few opportunities.

He proposes four different courses of action to deal with this perfect storm.

• First, improve fiscal policy efficiency for relief, recovery, and growth. More targeted assistance to households and businesses, rather than blanket transfers and price controls, would alleviate pain and make room for investment in infrastructure, health, and education.
• Second, strengthen macroprudential policies to reduce risks associated with global financial tightening. Greater and earlier transparency about financial sector problems hidden behind the cloak of regulatory forbearance would aid in the prevention of financial instability and misallocation.
• Third, reform trade-related policies in goods and, especially, in still-protected services sectors to take advantage of shifts in global trade.
• Fourth, change policy to encourage technology diffusion. Increased competition and improved digital infrastructure may boost incentives for technology adoption. Ending fossil fuel subsidies and other forms of assistance are also required to encourage the adoption of green technologies and to combat climate change.

Unsurprisingly, the World Bank's proposal aligns with the key agenda that Apec leaders will discuss during their summit at Queen Sirikit National Convention Centre in Bangkok on November 18-19.

Cherdchai Chaivaivid, the Thai Foreign Ministry's director-general of International Economic Affairs, said that Apec leaders will discuss how to advance the Asia-Pacific region through ongoing global economic challenges toward sustainable and inclusive economic recovery from Covid-19.

The summit will renew talks on the Asia-Pacific Free Trade Area (FTAAP) by establishing a long-term framework for dialogue, he added.

Apec members will also discuss digitalisation, sustainable development, and inclusive engagement.

Host Thailand’s guiding framework for the summit is titled “Bangkok Goals on BCG (Bio-Circular-Green) Economy”. The framework will push towards a sustainable, inclusive, and resilient Apec.

"If you want to grow quickly, go alone; if you want to grow sustainably, go together," said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), at a press conference for the Apec CEO summit.

He said that many of the issues currently facing the world arose because we failed to listen and talk to one another. The first in-person Apec summit in four years would be an excellent place to begin fixing this communication breakdown, he added.

Montri Mahaplerkpong, FTI vice president, said the summit is a great opportunity for participants to share what they have and what they lack so that they can figure out how to address urgent issues like food security, supply chains, carbon emissions, and competitiveness of small and medium-sized businesses.

Meanwhile, Kobsak Pootrakool, executive vice president of Bangkok Bank, said Apec members must cooperate to strengthen themselves, hasten recovery and combat recession.

He expects the summit to produce opportunities and paths for recovery in Thailand and other member economies.

Diop from the World Bank noted that global cooperation remains critical to overcoming our common challenges across all issues.

As such, the week-long Apec meet is an important opportunity to strengthen multilateral cooperation on these and other challenges, with a focus on solidarity and solutions, he said.

Apec comprises 21 economies accounting for 38% of the world's population, approximately 61% of global GDP and 47% of its trade in goods and services.