The year 2022 was defined by a sharp reset in global financial conditions. The IMF described a broad-based slowdown driven by the cost-of-living crisis, tighter financial conditions, Russia’s invasion of Ukraine, and the continuing effects of the pandemic. It projected global growth to slow from 6.0% in 2021 to 3.2% in 2022, while global inflation was forecast to rise from 4.7% to 8.8%. In financial markets, this translated into a year of aggressive repricing as interest-rate expectations rose, liquidity conditions tightened, and investors became markedly more defensive.

The IMF’s Global Financial Stability Report warned that financial stability risks had increased amid a series of cascading shocks, with disorderly tightening, stressed liquidity conditions and emerging-market debt vulnerabilities all becoming more prominent. In this environment, 2022 was not simply a cyclical slowdown. It was a year in which markets had to adjust to the end of ultra-accommodative conditions and to the return of inflation as the central macro-financial challenge.

Asia remained more resilient than many other regions, but it was not insulated from the new environment. The IMF estimated that, after rebounding by 6.5% in 2021, Asia and the Pacific would moderate to 4.0% growth in 2022, while noting that the region still remained a relative bright spot in an increasingly lethargic world economy. At the same time, inflation rose above most central bank targets, external demand weakened, and tighter global financial conditions created new pressures across the region. ADB likewise revised developing Asia’s 2022 growth forecast down to 4.3% and raised its inflation forecast to 4.5%, underlining how quickly the regional outlook had become more difficult as energy, food and financing pressures intensified.

For Asia, the significance of 2022 lay in differentiation. The region continued to provide an important share of global growth, but capital markets became more selective, policy choices more constrained, and investor confidence more uneven across jurisdictions. China’s property sector was identified by the IMF as a key source of vulnerability, while the broader region faced the combined effects of tighter global money, weaker trade momentum and the need to withdraw pandemic-era policy support more carefully than before. In that sense, 2022 marked a decisive transition from post-pandemic rebound to a more demanding era of monetary discipline and market discrimination.