A resilient Asia will drive global economic growth in 2023, despite the prevailing headwinds of monetary tightening and weak global growth, according to London-based think tank Asia House's Annual Outlook. The region’s economic momentum will come from strength in domestic demand.  Asia House economic readiness indices for this year indicate improvements in green finance and digital transformation.

Declines in Japan, for green finance and in India for both green finance and digital transformation were the exceptions.

Inflation has meant that, globally, central banks are more focused on restoring price stability than boosting growth; accordingly, a quicker pace of global monetary tightening would weigh heavily on Asia’s outlook.

Notwithstanding China’s expected sluggish growth for 2023, Asia is likely to prove resilient if investment and financial flows are directed to digital and green innovation to underpin sustainable growth and investment, it said.

Within South East Asia, digital development is likely to be scaled up this year, although the outlook is comparatively less upbeat for China, India and Indonesia, owing, in part, to lags in the Industry 4.0 development.

Intermittent flare-ups in financial volatility could be triggered by rising borrowing costs, high debt levels, and reduced global liquidity. Uncertainties in China and the risk of monetary policy errors also constitute risks.

The overall economic impact of COVID-19 will be less of an issue than it was in 2020 and 2021, moderating in most countries. But it is likely to persist in China, even with the scaling back of the zero COVID-19 strategy.

China is likely to balance the competing pressures of maintaining economic growth, providing stimulus measures to bolster domestic consumption, and improving health care capability in post-zero-COVID transition, the report said.

Key among the recommendations made in this report are those relating to prioritising innovation—to spur carbon pricing, lower green premiums for zero-carbon alternatives and boost underfunded and high-impact projects with blended finance.