Regional growth across the 21 member economies of the Asia-Pacific Economic Cooperation (APEC) would slow down next year and beyond amid intensified global challenges.
Citing its latest APEC Regional Trends Analysis report published this month, the non-binding group whose top leaders are currently meeting in Lima, Peru, said Asia-Pacific's economy is poised to grow by five percent this year before moderating to 3.1 percent next year and 2.7 percent in the medium term.
This is despite easing inflation in the region, from 3.8 percent last year to the estimated 2.9 percent this year and 2.4 percent medium-term projection.
"Risks including rising debt, heightened uncertainty, and geopolitical tensions pose further limitations to the region's economic potential. Yet, innovative technologies lower inflation translating to higher consumption, and core structural reforms offer paths to strengthen productivity and ensure economic stability in the region," the 35-year-old APEC said in a Nov. 12 statement.
The APEC report nonetheless noted that the Philippines registered the fastest real gross domestic product (GDP) growth last year, at 5.6 percent, among its members.
While downward inflation across the region allowed half of APEC's members to slash interest rates, the group warned that monetary authorities should "remain cautious of currency volatility and risks associated with abrupt rate cuts."
Since August, the Bangko Sentral ng Pilipinas (BSP) has already lowered its policy rate by a cumulative 50 basis points (bps) to six percent.
"Monetary tightening has reduced inflation, but as policy rates adjust, vigilance is necessary to manage exchange rate volatility," APEC policy support unit (PSU) director Carlos A. Kuriyama said.
"Authorities will need to be cautious about drastically reducing interest rates to avoid significant depreciation of currencies vis-à-vis the US dollar. This cautious approach will help preserve macroeconomic stability," he added.
APEC said regional trade recovered as goods exports increased by 3.1 percent year-on-year in terms of value and three percent by volume as of end-June this year, on the back of slower price hikes plus lower interest rates.
"Trade growth forecasts for APEC indicate uneven trajectories, with 2025 looking more promising," the report read.
In the case of the Philippines, APEC forecasted its goods and services trade volume to climb by nearly 10 percent next year—the highest in the region, from only about two percent this year.
But APEC flagged rising protectionism in Asia-Pacific, where economies imposed 345 trade restrictions on top of 944 trade remedies as of October, in a bid to support domestic industries.
"Protectionism, including increases in tariff lines, threatens trade growth and harms economic relations among APEC members. A renewed commitment to cooperation on trade issues is crucial to maintaining APEC's positive momentum in the face of evolving global challenges," PSU analyst Rhea C. Hernando cautioned.
Also, "price pressures could come from an increase in tariffs, which act as a tax on consumers purchasing imported goods," APEC's PSU warned in a separate statement.
In the long term, APEC wants to form a so-called Free Trade Area of the Asia-Pacific (FTAAP) spanning its member-economies, which include global economic superpowers—and rivals—such as the United States, China, Japan as well as Russia.