Global Economic Outlook – September 2022 Merchandise goods trade weighed down by lockdowns and global headwinds More generally, lockdowns in China have disrupted trade throughout the region. A number of cities in China are currently in lockdown, which is creating ongoing disruption to supply chains as well as dampening China’s imports from across the Asia region. And the sharp slowdown in activity, particularly in the construction sector, has weighed on demand for key exports for most economies across the region. China’s importance as a source of demand means that all economies will continue to be impacted; growth in Korea’s exports (a bellwether for the region) moderated to 6.6% year-on-year in August. Chart 17: Export growth, Asia 40% 30% Tourism arrivals recovering slowly but surely 20% 10% While tourism arrivals have started picking up, they remain well below pre-Covid levels. The recovery in Singapore -on-y 0 % y appears to be one of the strongest in the region, with -10% visitor arrivals reaching 50% of pre-pandemic levels in July. -20% But given the ongoing lockdowns and border restrictions in China, a full recovery is unlikely in the near term. With -30% tourism typically accounting for a significant share of GDP -40% in Thailand, Vietnam, and Indonesia, the speed of the 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 recovery in this sector will be a major driver of growth in the Singapore South Korea Thailand Malaysia Indonesia Philippines years ahead. Source: KPMG Economics, Macrobond. Chart 16: International arrivals, Asia Looking ahead, conditions are set to remain challenging. If the authorities are able to ease restrictions and policy, a 125 rebound in China’s economy will provide some welcome 100 relief. But with growth momentum slowing and major advanced economies in Europe and North America leading 0 0 the slowdown, any relief from an improved outlook for the 75 region will be short-lived. Overall, export momentum is 50 set to moderate over the next twelve months, as the full anuary 2020 = 1 impact of interest rate rises and high inflation materializes in 25 external demand for goods. Index, J 0 -25 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Singapore Vietnam Thailand Malaysia Indonesia Philippines Source: KPMG Economics, Macrobond. © 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 18