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APEC's gross domestic product grew by 3.5 percent in 2023 compared to 2.6 percent in 2022. The expansion was driven by robust household spending amid high consumer confidence, according to the latest report by the APEC Policy Support Unit.
"APEC's economic growth is outpacing the 3.2 percent global growth," said Carlos Kuriyama, director of the APEC Policy support Unit. "Government spending as well as healthy services sector, especially the solid recovery of travel and tourism have also contributed to this expansion."
"However, we are seeing a moderation in economic growth in 2025 and 2026 due to geopolitical uncertainties, trade protectionism as well as fluctuations in commodity prices. These challenges call for stronger multilateral cooperation between member economies," Kuriyama added.
The inflation rate has eased steadily, posting an average of 3.9 percent last year compared to 5.9 percent in 2022. It is expected to decrease further to 2.9 percent in this year. However, the report cautioned economies to not let their guards down.
"With inflation showing signs of moderation, economies are expected to lean toward easing their monetary policy rates to support growth," said Rhea C. Hernando, an analyst with the Policy Support Unit.
"Nevertheless, economies need to stay alert to dampen inflationary pressures that could come from possible supply chain disruptions such as reduced crude stock in key oil-producing economies, alongside ongoing geopolitical issues as well as exchange rate movements," Hernando added.
The report noted that in the past 12 months, 17 currencies in the APEC region have depreciated against the US dollar, ranging from -2.1 percent to -16.7 percent as of April 2024.
Another development to watch is the extended drought and increased maritime risks observed at the Panama and Suez Canals. These choke points have led to a significant escalation in freight costs, reaching their peak in late January 2024 and persisting at levels 50 percent higher than usual, as of April 2024 compared to a year ago.
"Uncertainties have dampened trade activity in 2023, affecting spending decisions and causing sluggish demand," added Glacer Niño A. Vasquez, a researcher with the Policy Support Unit.
"Accumulation of restrictive and unpredictable trade policies such as anti-dumping measures, tariffs and countervailing duties continued to increase, which can further curb trade activity," Vasquez said.
Trade numbers are reported to have contracted in 2023 although the report foresees a rebound in the horizon. The volume of APEC's merchandise exports grew marginally by 0.3 percent while imports contracted by 1.4 percent. The value of merchandise trade fell by -6 percent for exports and -6.7 percent for imports.
"Looking ahead, strengthening cooperation in the face of uncertainties is critical to overcoming obstacles and continuing the progress toward sustainable and inclusive growth that we have made since the COVID-19 pandemic," Kuriyama said.
"By remaining vigilant, reducing debt and rebuilding buffers, implementing productivity-enhancing structural reforms, and deepening cooperation, APEC economies can effectively navigate the complexities of the current landscape, strengthening economic fundamentals and regional ties for a future that is inclusive, sustainable and prosperous," he concluded.
