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Trade

Policy failure with Italian characteristics?

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Italian Prime Minister Giorgia Meloni at a press conference after the Council of Ministers, Rome, Italy, 3 November 2023 (Photo: Reuters/Augusto Casasoli).

Italy’s participation in China’s Belt and Road Initiative may end in 2024. The decision to join in 2019 led to political and economic costs that have not been offset by expected benefits.

Italy’s Withdrawal from the Belt and Road Initiative

Italy’s participation in the Belt and Road Initiative (BRI) may soon come to an end, as the country entered China’s initiative in March 2019. A Memorandum of Understanding (MoU) was signed in Rome by former Italian prime minister Giuseppe Conte and Chinese President Xi Jinping. Less than five years later, the whole BRI story risks becoming a major foreign policy failure for Italy.

Debating Italy’s Participation in the BRI

The MoU will be automatically extended in March 2024, unless terminated by either party at least three months in advance. As the deadline approaches, the government of current Prime Minister Giorgia Meloni is expected to announce its decision soon. In 2019, the Conte I government’s decision to sign the MoU was made amid a heated yet highly ambiguous political debate.

The Downside of Italy’s BRI Gamble

Italy’s gamble in joining the BRI has not paid off as expected. Critics have scrutinized Italy’s involvement in the BRI, and the COVID-19 pandemic has affected anticipated economic benefits. As a result, Italy has been unable to fully leverage the MoU and engage effectively with Chinese stakeholders, leading to a shift away from emphasizing its involvement in the BRI.

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Trade

Getting Vietnam’s economic growth back on track

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Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.

Vietnam’s Economic Roller Coaster

After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.

Trade Performance and Monetary Policy

Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.

Challenges and Prospects

Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.

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Thailand’s post-pandemic economic recovery still trailing behind

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Thailand’s economy is struggling to recover from the impact of the COVID-19 pandemic, with slow growth in GDP and GDP per capita. The government has implemented short and long-term policies to address economic challenges.

## Thailand’s Economic Slowdown

Thailand’s real GDP and GDP per capita have yet to outpace pre-pandemic figures, unlike other ASEAN countries. The Thai economy was severely affected by the pandemic, causing a slow economic recovery. The country’s large informal economy and dependence on tourism made it particularly susceptible to the impacts of the pandemic. While economic growth in 2023 was driven by activities in the travel sector, the manufacturing sector continued to contract, and merchandise exports continued to decline.

## Government’s Economic Policies

The new government’s short-term economic policies include providing a one-time digital cash payment to approximately 50 million residents, debt relief measures, and efforts to cut energy and electric train costs. Long-term economic measures consist of new free trade agreements, green industry projects, and a land bridge project. However, these measures have faced criticism from Thai economists due to significant fiscal implications and rising public debt-to-GDP ratio.

## Challenges in International Trade and Industrial Policies

Thailand’s new government is looking to boost international trade through free trade agreements. However, concerns are raised regarding the effectiveness of FTAs in driving global value chains and boosting trade. Additionally, industrial policies that emphasize domestic value added are being reconsidered in light of evidence that it runs counter to development from engaging in global value chains. The success of Thailand’s economic growth goals will depend on how supply-side constraints are addressed and resolved.

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The United States and China’s complex cooperation and rivalry continue

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The US-China relationship in 2023 had complex economic and technological dynamics. While trade remained substantial, there’s also intensified technological competition, as both countries seek to enhance communication and cooperation in 2024.

Economic and Technological Dynamics

The world has witnessed a complex tapestry of economic and technological dynamics between the United States and China, with 2023 marking a period of continued economic interdependence and technostrategic rivalry. Despite a nominal dip in US imports from China, bilateral trade volumes remained substantial. US exports to China totalled US$135.8 billion and imports stood at US$393.1 billion for January–November 2023.

Economic Relations and Tensions

Policymakers, cognisant of the perils inherent in economic decoupling, have started to eschew such a course. High-level meetings and initiatives offered a positive glimpse of potential bilateral relations. In contrast, the high-tech landscape in 2023 was tense. The United States reinforced its global stance against China’s ascendancy, supported by US political parties.

Future Prospects

Moving into 2024, the US–China economic and technological relations are poised to undergo a shift, characterised by enhanced communication, selective cooperation, and balanced management of both interdependence and competition. There is a mutual understanding among senior officials of the potentially devastating repercussions associated with misunderstandings and miscalculations in the US–China relationship. 2024 is expected to witness increased economic dialogues between Beijing and Washington.

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