Reflections on Asia

I’m finishing this note up on a 24 hour flight back from Auckland to Amsterdam after two weeks in Asia, talking to government officials, firms, and investors.  This note contains some reflections on economic and political developments in Asia.

Economic outlook

Previous notes have described the weakening economic outlook across Asia; recent World Bank forecasts for Asian growth were the weakest in 50 years.  However, relative to my home base in Europe, there is a sharp sense of economic dynamism.  Last week’s, IMF forecasts of growth rates across Asia were robust compared to other regions of the world – even if lower than usual. 

From India and Japan to the ASEANs, there are relatively strong growth outlooks.  Indeed, on IMF numbers, emerging and developing Asia will account for ~45% of global GDP growth this year, with China accounting for over half of that.  Advanced economies account for about one third of global growth.

Singapore’s advance estimates of Q3 GDP growth came in last week at a strong 1.0% qoq.  And the recent MAS outlook was more positive, reducing their assessment of the likelihood of a sharp downturn in Singapore.  This is instructive because, as noted recently, Singapore is a canary in the mine of the global economy.  Singapore is also investing tens of billions of dollars in expanding and upgrading its airport and ports, a vote of confidence in the future. 

China’s economic outlook also looks better from an Asian standpoint.  China’s economy faces deep structural challenges, from the real estate sector to a low consumption share of GDP.  China’s GDP for Q3 came in this week at 4.9%, stronger than expected, but on an ongoing path to lower trend GDP growth.  I am not a China bull, but some of the recent catastrophism about the Chinese economy is overdone.

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