Asia-Pacific region also tops for offshore services, finds global index
The year 2023 is witnessing a shift in global economic momentum, with the Asia-Pacific region emerging as a powerhouse for growth, reveals a recent report from GlobalData.
Investors' attention is drawn to the Asia-Pacific region’s potential, as easing inflation and strategic economic moves set the stage for a flourishing year.
GlobalData's insights reflect an evolving landscape, characterized by improving economic conditions in Europe, a resilient North American labour market, and the dynamic rise of the Asia-Pacific nations. While diverse business cycle stages across regions may lead to varying growth patterns, the Asia-Pacific economies are positioned to be the driving force behind nearly 70% of the world's economic growth.
Update to economic growth projection
GlobalData has updated its 2023 global economic growth projection to 2.1% in June 2023, marking a revision of 0.11 percentage points from its earlier forecast in March 2023.
GlobalData's Global Macroeconomic Outlook – Q3 2023 Update underscores the trajectories of regions in the face of shifting economic winds. The Asia-Pacific region stands as an outlier, projecting growth of 3.8% in June 2023, an upward adjustment of 0.10 percentage points from March 2023. Similarly, the Americas anticipate growth of 1.2%, indicating an increase of 0.11 percentage points, while Europe's outlook shines brighter with a 0.6% growth rate, an improvement of 0.22 percentage points.
However, the Middle East and Africa (MEA) region encountered downward pressure on its growth projection, marked by a 0.37 percentage point decrease to 2.8%. This shift is attributed to declining oil prices and reduced production, alongside challenges faced by less developed African nations grappling with high food prices.
Global inflation rate anticipated to ease
A pivotal aspect of the report is the global inflation rate, which is anticipated to ease to 5.3% in 2023 from 8.7% in the previous year. This decline, while significant, still maintains a level above major economies' central banks' targets. Inflationary pressures are expected to subside across regions, including APAC (6.6% in 2023), the Americas (9.9%), Europe (7%), and the Middle East & Africa (16%).
“In the first half of 2023, the EU27, G7, and the US observed a clear trend of alleviating inflationary pressure, driven by a decline in energy and food prices,” said Ramnivas Mundada, director of companies and economic research at GlobalData.
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“However, core inflation (which excludes the influence of volatile food and energy costs) exhibits a rising trend and reveals growing uncertainty in achieving the target inflation rate set by central banks. A key factor contributing to this uncertainty is the persistent surge in wages. As wages continue to rise, companies are facing higher labor costs, posing challenges in meeting the desired inflation rate.”
“Despite an optimistic outlook, persistent high core inflation, geopolitical tensions between the US and China, expected slowdown of the Chinese economy in H2 2023, and uncertainties from the conflict in Ukraine remain areas of concern. Proactively managing these risks is essential to sustain the positive economic trajectory,” he said.
APAC tops for offshore services
Similarly, APAC countries are still popular as potential offshore destinations for global companies, according to global management consultancy Kearney.
The 2023 Global Services Location Index (GSLI) studies the critical factors that make countries attractive as potential locations for offshore services. The GSLI ranks 78 countries based on 52 metrics that cover four dimensions including financial attractiveness, people skill and availability, business environment, and digital resonance.
It shows that business services like information technology, business process outsourcing (BPO), and engineering are increasingly being delivered across borders as companies seek to reduce costs, scale talent, and increase efficiency by utilizing the global talent base.
And APAC markets “shine” as potential offshore service destinations, with India, China and Malaysia continuing to lead the index as the top three destinations respectively, said Kearney — largely due to cost advantage, talent availability, and strong skills.
Meanwhile, Indonesia, Vietnam, Thailand, the Philippines, and Singapore are ranked among the top 15. Singapore jumps 24 ranks from 38th to 14th in this year's rank, the highest leap by any country.