Nadhra Fauzi had a good year last year. Or at least, that’s how it began. The Malaysian entrepreneur’s e-commerce fulfilment business TresGo, based in Subang Jaya, chalked up bumper sales during the year’s big online shopping festivals. On these “discount days” her customers “go all out”, she said, snapping up everyday items like nappies, wet wipes and other “cheaper supplies” – three months’ worth at times – as they seek out savings amid a ballooning cost of living crisis. On other days, especially towards the latter half of the year, orders were patchier, with sales rarely exceeding 20 per cent of shopping festival volumes. “Last year was good for retail but by Christmas, people had spent all their money,” she said. Indeed, it was a banner year for Malaysia ’s retail sector. Cash handouts boosted consumer spending on everything from cars and clothes to recreation, fuelling better-than-expected growth of 8.7 per cent – a 22-year high. The central bank was so buoyed that it declared Malaysia would avoid the looming recession that economists warn a third of the global economy would tumble into this year, as Prime Minister Anwar Ibrahim lauded a return of consumer confidence. Yet a closer look at the numbers reveals that growth is slowing – from a high of 14 per cent in the second quarter of last year to 7 per cent in the last – as the “ revenge spending ” trend and investment euphoria that marked Asia’s post-Covid reopening began to lose steam. China’s Gen-Z consumers prep for bout of ‘revenge’ spending on personal care Now, rising interest rates, impending recessions in Western markets and the economic aftershocks of Russia’s year-long war in Ukraine have created more muted conditions – and not just in Malaysia. “Economic growth is likely to start the year on the weak side across most of the Asia-Pacific as a fading reopening boost, slowing global manufacturing cycle, and past monetary tightening weigh on activity,” researchers at investment bank Goldman Sachs said in its “2023 Outlook: Inflation Peaks and Growth Troughs” report. Meanwhile, economists at IMA Asia, an association of regional CEOs and senior executives, said in a report that “the big fiscal stimulus tailwind of 2021 and 2022 is over” and noted “a stunning plunge in export growth across Asia” – hurting the bread and butter of the region’s economy. PK Cheng, chairman of Malaysian electrical and electronic appliances company Khind, said he’s certainly seen his exports “softening”, causing him to shore up his Shah Alam-based business by diversifying the products he sells. Recession fears Thailand posted full-year growth of 2.6 per cent last year, up from 1.5 per cent in 2021. But as in Malaysia, growth slowed in the fourth quarter, according to data published this month by Thailand’s economic planning agency. Exports contracted, with volumes falling towards the end of the year for machinery, chemicals, pickup trucks and computer parts. Domestic spending has been “pretty slow” too, said Bangkok-based businesswoman Kanjariya Tantraporn, thanks partly to higher interest rates as “a vast majority [of people] are in debt”. “People tend to save more in preparation for a possible recession,” said Tantraporn, adding that she’d shelved plans to expand her coffee and coffee machine business Espressoman Supply to other cities because of the uncertainty. Calvin Ng, a Singapore-based fund manager Calvin Ng with financial services firm Aura Group, is cautious too. His company raised finance for the refurbishment of the five-star Montien Hotel Bangkok in late 2020 and though tourism-reliant Thailand is seeing a rebound in visitor numbers , Ng noted that it’s “still far from the 40 million foreign tourist arrivals in 2019”. “We remain cautious into the medium term particularly around the impact of rate rises globally on discretionary spending,” he said. Falling demand In Vietnam , gross domestic product growth hit a 25-year high of 8.02 per cent last year, with boom times in sectors spanning agriculture and construction, according to the country’s statistics office. But surveys of Vietnamese consumers reveal falling incomes and “shocking losses” being suffered by real estate investors as property prices plunge, said Le Hong Hiep, a senior fellow and coordinator of the Vietnam Studies Programme at Singapore’s ISEAS – Yusof Ishak Institute, in an analysis. “The impressive GDP growth rate hogged the headlines of most local newspapers and was reported widely by international media outlets,” he said. “Yet, readers’ responses to the news and other reports carried by the media painted a rather different picture.” Vietnam “is not really out of the woods yet”, he said, further noting that the country’s well-established garment industry was losing export orders from Western markets. Ryu Trento, chief executive of Yukino Foods, said Vietnam’s growing middle class was helping to support his organic food business, which has factories across Asia, but warned that other sectors of the economy such as textiles and electronics had been “more heavily impacted”. “There is a clear and detectable drop in demand,” he said. Slowing exports have even led to lay-offs at some factories according to Leif Schneider, a lawyer at legal firm DFDL in Ho Chi Minh City who helps foreign investors in Vietnam. He said the numbers are small – a few hundred at a time – but they’ve nonetheless raised eyebrows in a country where factory hand are usually being constantly hired. Some of Schneider’s clients are now pivoting away from export businesses to invest more in local firms that serve the domestic economy such as IT or tech companies, he said. ‘Blue skies’ ahead? Cooling consumer demand, continued inflation, rising interest rates and slowing exports are just some of the many headwinds facing the region this year, yet economists across the board agree that China’s reopening will have positive spillover effects for the rest of Asia. The International Monetary Fund said this week that the sudden reopening of China, which alone accounts for half of the Asia-Pacific’s economy, “has paved the way for a faster-than-expected rebound in activity” due to “strong trade and tourism linkages” between the country and other regional economies. Growth momentum is also on Asia’s side, with the region likely to record a 4.7 per cent expansion this year, according to the IMF, compared to just 1.4 per cent in the US, 0.7 per cent in the EU and a 0.6 per cent contraction in Britain. Sofia Shakil, director of non-profit international development organisation the Asia Foundation’s economic programmes, said the forecast for the region was “blue skies with a chance of clouds”. [Asia will be] by far the most dynamic of the world’s major regions and a bright spot in a slowing global economy IMF economists’ forecast Trento would tend to agree. “It’s easy to forget that inflation in Vietnam is only half of that in the US,” he said. While Schneider noted that in Asia, “people make less money but they are still making money”. Not every country will do well. Emerging Asia is expected to outperform developed economies such as Singapore , South Korea and Japan – the last of which recently averted entering a technical recession, but rebounded from pandemic lows much less than expected. Will Asia avert a full-blown recession? China’s reopening means it might Yet the overall picture is rosy, especially if food and oil prices continue to ease. Asia will be “by far the most dynamic of the world’s major regions and a bright spot in a slowing global economy,” said the IMF’s Krishna Srinivasan, Thomas Helbling, Shanaka J. Peiris in a note on Tuesday.