Asia-Pacific Region – 2022 Talent Outlook
Based on the recent United Nations estimates, the population of Asia is about 4.7 billion. Asia’s population is equivalent to 59.76% of the total world population.
China is the largest economy in Asia, followed by Japan, India, South Korea, and Indonesia. These five together hold a huge 76.5% share of the Asian economy.
FIVE ECONOMIC FACETS TO WATCH IN ASIA PACIFIC 2022
The Asia Pacific region has continued to deal with COVID-19 outbreaks in the first half of 2022, resulting in the extension of border closures and travel restrictions. China’s strict zero-COVID policy has been one of the main factors holding back both regional and global growth over the last few months. The latest edition of the OECD Economic Outlook cites the conflict in Ukraine and China’s lockdown measures as the key reasons for the sharp downgrade in its 2022 global outlook. The organization now projects that the global economy will grow by 3.0% in 2022, significantly slower than 2021’s 5.8% expansion and 1.4 percentage points below the global economic forecast released in December 2021.
With the above in mind, here is an examination of some of the data that will guide in monitoring the Asia Pac economies in 2022.
Wide Range of GDP Forecasts Across the Region
The growth outlook for the Asia Pacific region is somewhat of a mixed bag. However, the broad trend is that the larger countries will see slower growth in 2022 compared to 2021, while smaller countries will see their GDP growth accelerate. Japan is one important exception, with growth expected to increase from 1.7% in 2021 to 1.9% in 2022; nonetheless, this is still the second slowest growth in the region, after Hong Kong, China (1.1%). Interestingly, the two economies projected to grow the fastest this year, India (+7.3%) and Philippines (+6.7%), are the two that experienced the worst downturns in 2020 as the COVID-19 pandemic hit.
China Sees Weak First-Half Growth
China’s economic growth is expected to slow considerably in 2022, falling to 4.7% from 2021’s strong 8.1% growth. The most recent quarterly data on China’s economy shows that first-quarter real GDP growth slowed to 1.3% (quarter-over-quarter) from 1.5% in the fourth quarter of 2021. Strict lockdowns in the key economic centers of Shanghai and Beijing in response to a new wave of COVID-19 in March are expected to suppress growth into the second quarter. Recent data shows that retail sales fell 11.1% year over year in April, on top of March’s 3.5% decline. In addition, April industrial production contracted 2.9% year over year, its first decline since the first quarter of 2020. Economists surveyed by FactSet are projecting that the economy will contract by 2.1% in the second quarter.
Inflation Rises with Global Energy Prices
While inflation has increased across the region, for the most part, the growth rates have not been of the same magnitude as in Europe and the United States. The main exception is India, where the country’s dependence on imported oil, coal, and fertilizer is pushing prices up faster than in most other countries in the region. In Japan, which has struggled with deflation for the last three decades, surging global energy prices have pushed inflation to levels not seen since 2014 and 2015, the last time oil prices surpassed the $100/bbl level.
Central Banks Move to Raise Rates
Central banks in some Asia Pacific countries are aggressively raising rates to combat rising inflation. New Zealand and South Korea have already seen five interest rate hikes in this cycle, with the actions by the Reserve Bank of New Zealand totaling 175 basis points since October 2021. Australia, Hong Kong (China), and India are next with two hikes, followed by Malaysia and Philippines with one hike each. Analysts surveyed by More rate hikes are expected in the second half of the year and into 2023, with the largest increases expected in Hong Kong and New Zealand.
Japan Faces Surging Import Prices
While other central banks around the world are raising interest rates, the Bank of Japan’s key policy rate remains in negative territory, at -0.1%. This has led to a sharp depreciation in the yen, which is currently trading above 134 against the U.S. dollar, its weakest level in 20 years. Combined with rapidly rising global oil prices, this has led to a sharp increase in import prices. In May, Japan’s yen-based import price index grew at a record annual pace, showing a year-over-year increase of 43.3%. For this import-dependent economy, these dramatic price increases come on top of ongoing concerns about COVID-19 and the strength of Chinese goods demand.
Economic growth is expected to slow sharply in China to a below-consensus 2.9% y-o-y in Q1 2022 and 3.8% in Q2, before Beijing’s pain threshold is triggered. Policy easing around spring 2022 could reverse the slowdown and support a recovery in the second half of the year.
In Asia FX strategy, the main themes into the first quarter of 2022 include an acceleration in US Fed tapering, the European Central Bank maintaining an easy policy ahead and China growth slowing substantially. These are likely to lead to further strength of the US dollar against G10 currencies and will feed through to Asia FX.
In equity strategy, with the recent hawkish tone from the Fed and the path of Omicron still unclear, near-term volatility is expected. But we are constructive on Asia equities for 2022 as stocks do have some buffers to withstand the volatility: relative and absolute valuations are moderate, balance sheets of Asian companies are healthy and corporate earnings will continue to grow in 2022/2023.
Asia Pacific employees are actively looking or open to new opportunities in 2022
Employees across Asia Pacific reported lower satisfaction with their jobs in 2022, according to a report. The data from the report showed 81% of employees are either actively looking for a new job or indicated being open to opportunities.
The research surveyed 9,598 skilled professionals across China, Hong Kong, Japan, Malaysia, and Singapore to understand their salary expectations and career plans.
The biggest reasons why people are thinking of leaving their jobs are due to compensation and career development.
It is noted that these were also among the top reasons cited for those who have no plans to leave their current job. Other factors that correlated highly with intention to remain with their current employers included satisfaction with work-life balance, availability of flexible work options, and alignment of company and personal values.
At the same time, organizations are planning to hire more. With 69% of respondents predicting an increase in business activity levels in 2022, more than half also expect staff levels to rise in the next twelve months. This is in line with the reported reduction of hiring freezes, which is especially significant in Hong Kong, Malaysia, and Singapore.
Meanwhile, 74% of employees said they did not expect or were unsure about receiving a promotion in 2022.
Employee data also indicates some dissatisfaction with compensation. Of the 37% of employees who asked for a raise in 2021, slightly over two-thirds were successful. This is perhaps the reason behind the growing appetite for higher salaries, with 80% of respondents expecting a salary increase, and nearly one in every four people anticipating an increase greater than 10%.
While research found that employers seem willing to accommodate some increment in salaries, especially since the biggest reason for skills shortages was the higher compensation offered elsewhere, increments will largely remain within the 3-6% range. The researcher added that more employers have indicated plans to give staff bonuses in 2022.
The report also showed that when considering a new role, candidates preferred flexible working options including home or mobile working (65%), flexi-time (change work hours outside of core business periods) (59%) and compressed hours (e.g., fitting a five-day week into four days) (28%).