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ASIA: Deloitte: Asia set to ride wave of global recovery
The economic situation this year will be better than most economists expect despite protectionist rhetoric from the US and nervousness in financial markets, says the Deloitte consultancy.
According to the first edition of Deloitte’s “Voice of Asia” reports, three factors suggest that global growth is about to pleasantly surprise, with Asia leading the way.
“First, the global economy is finally normalising after a decade of shocks, and a natural healing process is underpinning a more resilient recovery,” said Ric Simes, a Deloitte economist. “Second, world trade is already lifting and the benefits of this are spilling into Asia. The third is that Asia’s mega-economies of India and China, as well as the economies of Southeast Asia, are increasingly being powered by consumer booms, acting as a stabilising force in their economies and for the region.”
After a series of shocks that began with the global financial crisis and continued with the euro-zone debt crisis and geopolitical shocks in the Middle East, Europe and Asia, the global economy is finally normalising. Deloitte predicts global growth can even accelerate in 2017, with leading indicators already pointing to a rise in world trade.
A more buoyant US economy and stabilisation in other G7 economies will help; but again it will be the Asian markets that lead the way.
There are major risks to be managed, including continuing stresses in global financial markets, whether the anticipated depreciation of the Chinese yuan can be achieved in
an orderly fashion, and the threat of resurgent protectionism. But Southeast Asia economies are better placed to limit the impact of adverse developments.
World trade volumes were damaged by successive crises and shocks in recent years, but leading indicators suggest volumes are beginning to expand.
Asean nations are well placed to capitalise on this global recovery in trade and will benefit in different ways. The rise of manufacturing good exports, for example, should see stronger growth in Malaysia, Thailand, and Vietnam.
Risks remain in 2017, the report said. More important for regional economies will be how the anticipated depreciation of China’s yuan is handled.
“Asia is increasingly plugged into China-centric value chains,” said Sitao Xu, a Deloitte economist. “Any impact on China from yuan devaluation or other policy changes could have a significant knock-on effect on other Asian economies. However, in the long run, most economies in Asia will benefit if China succeeds in rebalancing its economy.”
While US President Donald Trump is still largely an unknown quantity, his influence on global trade may be overstated. Indicators point to Asian and global trade strengthening, despite the rise of nationalistic and protectionist voices globally.
In Southeast Asia in particular, it is likely that the strengthening of intra-regional trade will outweigh the potential rise of protectionism in other parts of the globe.
“As we head into 2017, there is much concern about the many uncertainties that cloud the outlook for Asian economies,” said Manu Bhaskaran, director of Centennial Group and a Deloitte alliance partner. “While it is true that there is much that can go wrong, we also believe that pessimism is misplaced. Despite some headwinds, Asian economies are likely to perform better this year than last.” Asia’s mega-economies, China and India, are increasingly being powered by consumer booms, providing Asia with an additional line of defence if global growth is not as good as expected and trade tensions boil over.
“A new and optimistic generation is taking the lead in driving the direction of their economies: one that is technologically savvy, comfortable with the borderless consumerism of the global middle class, and yet imbued with the consumption-smoothing instincts of its parents and grandparents,” said Eugene Ho, Deloitte Southeast Asia’s leader for consumer and industrial products. “The emerging trend of consumer-to-consumer business in markets such as Thailand will also continue to change the consumer landscape for the new optimistic and tech savvy consumer.” With income levels continuing to grow in Southeast Asia, consumers there are well placed to support domestic demand and help buffer their economies from any adverse developments that may surface.
“There’s never been a better time to create a cohesive narrative for Asia — we believe that the themes explored in the Voice of Asia report will shape the debate in this highly interdependent region and help businesses and governments navigate the challenges and realise the opportunities that will underpin Asia’s current and future prosperity,” said Philip Yuen, chief executive of Deloitte Southeast Asia and Singapore.
Source: http://www.bangkokpost.com/business/news/1189937/deloitte-asia-set-to-ride-wave-of-global-recovery