The global economy has faced adversity and uncertainty in recent times. Political kerfuffles such as Brexit and trade wars between the US and China have made markets less than stable. However, there is some good news as Asia’s emerging economies – particularly in Southeast Asia – are predicted to go from strength to strength.
Fuelling Emerging Asia
Emerging Asia seems to be the buzz phrase these days when it comes to economics. With more than half of the world’s population and the rise of the new middle class – in China especially – these emerging markets are fuelling economic growth for most of the region.
‘In the past decade, over 400 million people in China have left poverty and joined the middle class,’ says David Dali, portfolio strategist for Matthews Asia funds. Dali also points out that China has made massive improvements in transport links between its megacities and its smaller cities.
Transport is set to play an important economic role, according to the Development Centre of the Organisation for Economic Co-operation and Development (OECD). Its 2019 Economic Outlook for Southeast Asia, China and India 2019 is subtitled ‘Towards Smart Urban Transportation’.
In essence, time is money. With new affluence comes new consumers, many of whom want to show off their wealth with new cars. The result is inefficient urban transport in the developing countries of ASEAN, China and India.
It is also an indication that boom times have arrived in Asia, although it also indicates that the urban transport planning has not managed to keep up.
The OECD report predicts a growth in Gross Domestic Product (GDP) of 6.1% for the five years from 2019 to 2023 for ASEAN, China and India.
The OECD ‘assesses prospects for member and major non-member economies’. It is worth noting that the only two Asian signatories to the ‘Convention on the Organisation for Economic Co-operation and Development’ are Japan and Korea, neither of which feature in the report.
According to the OECD report, ASEAN is to maintain its 5.2% growth rate of the past few years, while China’s past growth rate of 7% and more will slow to around 5.9%. India, on the other hand, is expected to rise in the medium-term to 7.3%, up from the 6.9% average from 2012 to 2016.
The assessment for Singapore’s and Brunei’s growth in 2019 is 2.3% and 2.9% respectively. But it is Emerging ASEAN markets that will see the greatest growth. Cambodia, Laos and Myanmar are pegged at the 6.8% to 6.9% mark, with the Philippines at 6.6%and Vietnam at 6.5%. Indonesia (5.2%), Malaysia (4.8%) and Thailand (4.1%) make up the middle ground.
People Generating Growth
Private consumption – people buying stuff – is what fuels growth in most of the ASEAN countries and in China and India.
Inward investment, infrastructure projects, and exports all create jobs. Low unemployment means more people are earning more money, especially in the case of those moving from the countryside to the cities where wages are two- to three-times higher.
Despite the uncertainty of trade wars, where tariffs are raised and counter-raised by feuding countries – think China and the USA under Trump – the outlook is good for Asian countries because of the strength of their domestic demand and the growing confidence in their internal fiscal management.
Causes and Effects
The potential spanners in the works include local events, such as natural disasters, geopolitical factors, social unrest and global events, such as cybersecurity, oil price fluctuations and the monetary policies of developed countries who control institutions such as the International Monetary Fund.
As the largest developing country in the world, China is beginning to flex its muscles in terms of having a say in international governance, while its Belt and Road Initiative – the New Silk Road – is helping the emerging economies and at the same time ringing alarm bells.
While predictions for 2019 GDPs are possible through the analyses of recent statistics and extrapolation, bear in mind that forty years ago no one could have predicted the miracle of Singapore today nor the wonder of China rising to become the second-largest economy in the world.