This interview is part of the Hinrich Foundation Future of Trade Interview series.

Higher than anticipated economic growth in 2021 for the Asia Pacific region will be a key discussion topic during the upcoming meeting of Trade Ministers for the Asia Pacific Economic Cooperation (APEC). Strong domestic and global activity buoyed by pent-up consumer demand has spurred optimism for a durable economic recovery, explains Denis Hew, Director of APEC’s Policy Support Unit, in an interview, the first in the Hinrich Foundation’s Future of Trade Interview Series. To address remaining downside risks, Hew urges for more trade and economic policies that reduce regulatory uncertainties and address the growing digital divide.

Q: In the newest APEC Regional Trends Analysis, the regional economy is performing better than expected. How so?

It is a strong recovery compared to last year, when we were looking at a contraction of 1.9 percent. In value terms, this year’s 6.3 percent growth translates to USD5 trillion in terms of output. Last year, we had lockdowns and travel restrictions at the height of the pandemic. Towards the second half of 2020, we began to see a relaxation of restrictions. For some economies, we began to see positive economic data in the fourth quarter of 2020. The strong economic recovery is partly driven by pent-up demand as lockdowns are relaxed and people go out more and spend.

Softer contraction in APEC GDP

Source: APEC Regional Trends Analysis, APEC Policy Support Unit, May 2021

There are uncertainties and downside risks to this outlook. We are seeing a resurgence of infections and new variants of the virus. We are again seeing a tightening of movements and restrictions in the region. This kind of stop-start opening of economies can have an impact in terms of economic growth prospects.

There are other concerns. Last year, many economies implemented different types of stimulus packages to help households and businesses. These led to sizeable fiscal deficits. This year, rather than across the board measures for all businesses, we are seeing much more targeted fiscal support.

Other concerns are rising inflation. But so far, we are looking at up to 2.0 percent for the region this year. It seems manageable.

Source: APEC Regional Trends Analysis, APEC Policy Support Unit, May 2021