The outlook for Asia, much like for the rest of the world, is being shaped by the shock of the conflict in Ukraine. Asia has only a relatively small direct trade and financial exposure to Russia and Ukraine, but the reach of its economies will be impacted through higher commodity prices and slower growth in European trading partners.

According to the International Monetary Fund (IMF)’s latest forecast, Asian GDP is expected to grow 4.9 per cent in 2022, or 0.5 percentage points less than it projected in January and slower than last year’s growth of 6.5 per cent. “The downgrade in Asia is smaller than in Europe, which has closer economic ties to Russia and Ukraine, but more so than commodity exporting regions like the Middle East and North Africa and Latin America,” Ms. Anne-Marie Gulde-Wolf, Acting Director of the Asia and Pacific Department at the IMF, told a press conference on the Asia and Pacific Region’s Economic Outlook on April 25.

Despite the downgrade, she went on, Asia remains the world’s most dynamic region and an important source of global growth. Inflation in the region is also starting to pick up after being much lower than elsewhere last year. Inflation is now expected to rise to 3.4 per cent in 2022, or 1 percentage point higher than expected in the January forecast. Therefore, the region faces a stagflationary outlook, with growth being lower than previously expected and inflation being higher.

For Vietnam, Ms. Gulde-Wolf told VET that the IMF projects growth at 6 per cent this year and 7.2 per cent in 2023 as the economy normalizes and the recently-approved fiscal support package starts to show its effect. “Vietnam really was an early success case in dealing with Covid,” she said. “So, in 2020, it was posting the fastest growth in all of Asia. Unfortunately, that also led to a slow start to its vaccination campaign, and in 2021 we saw a significant downgrade of our growth forecast, from more than 5 per cent to 2.6 per cent, as the country was forced by a new wave of Covid to impose strict restrictions on mobility. Luckily, we now see signs of the economy rebounding strongly. This is based on a successful vaccination campaign. We see rising retail sales, production, and exports, and a shift to ‘living with Covid’, which has allowed much higher mobility than what we saw before.”