Asian countries compete with major economies on growth rates
Although global economic growth continues to slow due to tightening monetary policy and the ongoing impact of the Russia-Ukraine war on economic activity, the Asia-Pacific region remains vibrant, with experts and international economic institutions predicting economic growth of more than 10% in 2019. The U.S. and Europe contributed 70 percent of global economic growth this year.
According to the “Regional Economic Growth Outlook” report released by the International Monetary Fund in May last year, economic growth in the Asia-Pacific region will be mainly driven by China’s recovery and India’s resilient growth. Gross regional product is expected to grow by 4.6% in October, 0.3 percentage points higher than forecast.
According to the IMF’s latest forecast, the region will contribute around 70% of global growth. Note that the region will grow by 3.8% in 2022.
U.S. investment bank Morgan Stanley expects Asia’s economic growth to outpace that of the U.S. and Europe by the end of 2023, saying the country has largely shrugged off interest rate shocks as it expects China’s full recovery to drive Asia’s recovery. Coming into the second half of the year, Asia’s three largest economies (India, Indonesia and Japan) are also showing strong domestic demand.
Experts believe that one of the most important reasons for Asia’s high economic growth is that, in addition to relying on cheaper energy than Europe, it does not have the serious inflation problem like the United States and the euro zone. This includes, for example, exporting oil from Russia at reduced prices.
The Rise of Economic Power
Speaking to Sky News Arab Economics, Mazen Salhab, chief market strategist at BDSwiss MENA, said: “It is clear that global economic growth is no longer solely dependent on advanced economies. There is a fact that must be taken into account that the decision-making center of the world economy is taking place. change, there are economic powerhouses that have achieved greater growth than advanced economies known historically, and the IMF forecasts a growth rate of only 1.2 For example, advanced economies are growing by 4% this year, while emerging and developing economies are growing by 4% %. For example, growth in the US is projected to be 1.4% by 2023, compared with 5.2% in China and 6.1% in India.
limited inflation
Asked why inflation has not risen significantly in Asia compared to Europe and the US, Sahab replied: “One of the reasons inflation in many large economies such as India has not risen significantly is 4.2% compared to 4.2% in China. %.” Compared with the United States (4% now, 9% a year ago), the Eurozone (6.10%) and the United Kingdom (8.7%), these countries rely on cheaper energy than Europe, including oil, which is 0.20%. In addition to Russia’s cut-price exports, Iran’s oil exports sometimes reach about 2 million barrels per day, especially to China, and we forget that Russia’s Urals oil price level has fallen by 38% in a year, more than Brent and Occidental Decker Sask Light is already relatively cheap ($57 a barrel), compared with $72 for WTI and $76 for Brent.
depreciation of Asian currencies
On the other hand, the currencies of these major Asian countries continue to depreciate against the US dollar, which is an important factor to boost their exports. The RMB will depreciate against the US dollar by 3.2% in 2023, while the US dollar will remain at a high level of 5.1% in 2023. Salhab said the rupee has gained against the Indian rupee for the year so far, affirming that “India grew by 6.1% year-on-year in the first quarter, which was linked to strong growth in the services sector, which accounts for more than half of the GDP, So we can imagine huge growth in an economy of more than 1.2 billion people.”
Chief Market Strategist at BDSwiss MENA He added: “Thirty years ago, globalization had important advantages in reducing production costs and reducing global inflation, rather than limited national domestic policies. Therefore, we believe this trend has been and will continue to Sustained.” as a strategic goal for large companies that will continue to open factories. “While major producers in India, China, the Philippines, Thailand and Vietnam benefited from strong growth and rising levels of consumption, services and purchasing power.
He pointed out that “demographic nature also helps Asian economies more than advanced economies, and if you exclude China, whose population will shrink due to aging, the population numbers and growth rates in developed countries are declining (Japan, Italy and even Germany ), and these countries have a small youth population base. “It is one of the developing countries with a broad population pyramid base, which makes consumption higher and labor costs cheaper, which is crucial in global competition. “
Less impact from supply chain disruptions
Sahab explained that “disruptions to global supply chains, which lead to higher transportation costs, have less of an impact on China, India and neighboring countries that benefit from their geographic location, and goods that go into production are generally available in many of these countries and not Obtained.” Must be imported like in Europe. “The UK and the US, which includes minerals and raw materials, also don’t forget that emerging economies have lower labor costs and cannot pay billions of dollars to support the economy under the impact of the epidemic, as rich countries do, because these billions The dollar is a double-edged sword because it helps spending and supports companies, but it also strongly boosts inflation.
It can be simply stated that the world is heading east and the next two decades will be an important playing field in Asia, which will also open the way for improvements in investment rules, governance, financial and investment regulation in these economies. BDSwiss MENA Chief Market Strategist said that China will achieve a growth rate much higher than that of the seven major countries, so China will become the world’s largest economy in a few years, followed by India and will soon become the third.
dynamic region
In turn, economist Dr Abdullah Al-Shennawy told Sky News Arab Economics: “The global economy is expected to face many challenges this year, with global growth continuing to slow amid the ongoing impact of tightening monetary policy. Europe Financial sector problems and inflationary pressures in the United States and the United States will bring more uncertainty. Despite the bleak outlook, the Asian region remains dynamic. As a result, the region is expected to contribute about 70% of global growth this year, up from 2022. 3.8% accelerating to 4.6% in 2023.
El-Shennawy expects emerging Asia to remain one of the most attractive regions for business leaders and investors over the next two decades, given the development of the consumer class, digital transformation and rapid urbanization, possibly due to the following reasons:
External demand for technology goods and other exports was weak.
*The reopening of China will provide a new strong stimulus, usually the strongest impact comes from investment goods demand, but this time the impact is from consumer demand. Only China and India are expected to account for more than half of global growth this year, with Cambodia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam in the rest of Asia contributing an additional quarter or so.
* The dollar lost some strength, helping Asian currencies recover.
* Previously high inflation tends to moderate.
Supply chain disruptions are reduced.
The service industry is booming.
growth engine
When answering the question about the growth drivers of countries in the Asian region whose growth rate is higher than that of the United States and Europe, Dr. Shen Nawei replied that there are many kinds of growth drivers, which we list as follows:
* For China, shifting from investment-based growth to more sustainable consumption growth, while for other economies such as India, Indonesia, Philippines, Bangladesh and Vietnam, their interest is focused on mobilizing resources for infrastructure And investment not to mention each economy will develop in its own way and there will still be a commonality or magic key: economic integration.
* A large domestic market, with the possibility of increased productivity and cheap labor, coupled with government policies that are more conducive to improving the business environment and attracting foreign direct investment, can lead to high economic growth rates.
* Consumption, with a growing middle class expected to unleash pent-up demand, underpinned by savings accumulated since the pandemic began, particularly in China ($861.85bn).
* Another driver is relatively favorable demographics (India and Philippines), unlike China, which has initiated labor market reforms to ease population aging.
* A comprehensive regional economic partnership will achieve maximum efficiency and economic integration.
* The world is moving towards multi-polarization, the weakness of US hegemony.
* Trend of using clean energy.
Factors Affecting Economic Performance of Asian Countries
Despite raising growth forecasts for the Asian region, economist Dr Al-Shennawy pointed to several factors affecting the economic performance of Asian countries and expressed doubts about the risks facing Asian countries related to expectations, namely:
* Sustained high interest rates and their uncertainty indirectly affect the currency.
* High debt levels in some economies, and the possibility of reducing debt levels without affecting economic growth.
* The European Central Bank and the Federal Reserve Bank tightened monetary policy in the face of inflation, leading to slower growth in Asian exports.
* Markets see some distortions due to COVID-19.
Al-Shennawy said that Asian countries must adopt policies that mitigate risks and support growth, including the need to return inflation to target levels, stabilize public and private debt, protect financial stability, enhance long-term growth potential, and ultimately the need for fiscal policy to align with Macroeconomic policies remain consistent, including monetary policy and exchange rate policy.
Overcrowded and Open Economy
International energy consultant Amer Shubaki explained in an interview with Sky News Arab Economics that Western advanced economies can be said to be economies with more excess in the investment sector than in the open sector. Asian economies like China and India, since they are emerging and highly developed economies, means that these economies have room to grow and progress among other factors, whether it is high specialization, number of factories, high investment, etc. . With wages and per capita incomes in Asia still lower than those in Europe and the US, there is growing global demand for high-quality, low-priced goods.
For example, according to the forecast of international organizations, in the next five years, China’s economic growth will contribute 32% to global economic growth, and the growth of China and India will account for about 50% of global economic growth. Schubaki said the IMF’s forecast of global economic growth of 22 percent confirmed the importance of these countries in the world, which increased at the expense of advanced economies, including the United States and European countries. for the price.
demand for oil
Al-Shobaki said that when there is economic growth, movement and activity, there is a demand for oil, so it has been relying on China to increase oil demand because China is the largest oil consumer in the world, he explained, “China Many countries, such as China, India, and Japan, rely mostly on imports for oil demand, and producing countries rely heavily on these countries. If there is economic growth, it will increase the growth of oil demand. Therefore, China is expected to account for 50% of this year’s oil demand growth. % to 60%, so producing countries have to keep an eye on these countries and maintain good relations with them, because it is the main destination of oil. Disposal of its energy products, be it oil or gas.