Asian export slump set to stabilise after Q2 2023

22 May '23

2 min read

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Insights

Asia's export decline is predicted to stabilise post-Q2 2023.
Influenced by factors such as China's zero-COVID strategy and a downturn in goods demand from developed markets, the slump should ease as these factors dissipate.
Economists predict a 50 per cent chance of a U-shaped recovery, with differing impacts across Asia depending on demand sensitivities.

Asia’s export decline, which has extended over a year, is projected to reach a turning point after the second quarter (Q2) of 2023. Factors such as China’s zero-COVID strategy and property downturn and reduced goods demand in developed markets are believed to have contributed to the slump. However, as these elements fade, a stabilisation in Asia's export growth is anticipated, as per Nomura.

The economists have identified China's import demand as one of the key factors supporting Asian exports’ recovery. China’s real import demand is expected to recover from a 6.0 per cent contraction in 2022 to an increase of 4.8 per cent in 2024, authors Sonal Varma, chief economist for India and Asia ex-Japan, and Si Ying Toh, macroeconomic research analyst for Asia ex-Japan, wrote in an article titled ‘Asia Economic Monthly: Shape of Asian exports recovery: L, U, V or W?’ on Nomura’s website.

Various scenarios were anticipated for the recovery, with a U-shaped recovery being the most probable at 50 per cent. In this scenario, exports bottom out in Q2, with steady growth in H2. A double dip (W-shape) due to weaker US demand and a sharp recovery (V-shape) led by a faster semiconductor rebound are also considered. An L-shaped recovery is considered the least likely.

The analysis also suggested that, within Asia, the impact across economies will differ depending on sensitivities to demand from the US and Europe. The report concluded that despite expected export recovery post-Q2, domestic demand in Asia is likely to weaken, which could warrant an accommodative monetary policy stance to counter disinflationary factors.

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