Highlights from the Asian Economic Integration Report 2023 (AEIR) by the Asian Development Bank (ADB) show that nations in the Asia and Pacific region are seeing the effects of tightening monetary policies as countries try to tackle inflation.
According to the report, although Asia’s trade volume remains strong, many advanced economies are tightening their monetary policies to stop inflationary pressures. This is adversely affecting demand from such countries and is not a good sign for the region’s exports.
At the same time, sanctions that have been placed on Russia due to the country’s invasion of Ukraine have also played a crucial role in commodity price surges.
Weakening local currency values through 2022 also added to the pains of growing import bills for the major food and energy importers of the region.
Meanwhile, rising rates from the United States Federal Reserve have had an adverse effect on Asia’s economy, with developing countries’ debt payments rising 120% between 2010 and 2021, currently at their highest since 2001, according to CNBC.
Laos has seen one of the highest rises in inflation of all Asian nations, topping out at 41.3% in February.
The price rise of the food and non-alcoholic beverage category soared by 49.3 percent, followed by the communications and transport category (47.4 percent), medical care and medicines (42.4 percent), hotel and restaurant category (36.2 percent), and household goods (35.4 percent).
But some experts believe Laos and China have huge potential to boost bilateral trade, as the Lao-China railway, a part of the bigger Kunming-Singapore railway or Pan-Asia rail network, continues to facilitate the export of goods.
The railway network recently ferried 647,700 tons of goods, a 320 percent increase over the same timeframe in 2022, along with transporting 417,400 passengers in the first two months of 2023.
Based on the AEIR, the People’s Republic of China (PRC) remains the top destination for forward direct investments (FDI).