Increased domestic demand affects Asia’s growth
Analysts at Morgan Stanley are confident that Asia’s growth will exceed that of the US and Europe in 2023. The main factor for this will be an increase in domestic demand.
According to Chetan Ahya, Morgan Stanley’s lead economist for Asia, China is recovering from the slowdown associated with the zero-tolerance Covid-19 policy. Since the beginning of this year, the authorities have changed how they organize fiscal policy and mainstreamed monetary measures, which has yielded positive results. Other regions are not inferior, with stable demand growth in various economic sectors. This applies to Japan, India and Indonesia, where the market is strengthening. Chetan Ahya estimates that economic growth in Asia will be around 500 bp by the end of the fourth quarter.
Analysts from the IMF also agree with Morgan Stanley’s forecasts. They believe the region will continue to grow strongly, although overall, 2023 will be an extremely challenging year for the global market. One factor in this assessment was that several Asian countries had tightened monetary policy. However, this has not affected domestic demand – it continues to grow.
The IMF believes Asia will account for around 70% of global economic development this year. The region’s GDP is expected to grow by 4.6%, up from 3.8% in 2022.
China’s economic recovery
The country’s GDP increased by 4% in the first quarter, which aligned with experts’ expectations in a Reuters poll. According to Ahya, the Chinese economy is recovering even better than analysts predicted. At the same time, he believes inflation is not a severe risk to the Chinese market. In this case, paying attention to the recovery in individual sectors of the local economy is essential. The key for China will be the improvement in the real estate market, which survived the crisis in 2022. A positive dynamic here provides a good impetus for an overall recovery.
According to a survey by the People’s Bank, more and more Chinese desire to buy a house. Analysts suggest that several factors have contributed to the change:
– the number of such people has increased significantly since the country’s authorities relaxed measures to prevent the coronavirus;
– the Chinese government has introduced programmes to support the purchase of real estate.
China remains one of the main drivers of economic growth in Asia, and the economy here has shown excellent growth rates since the start of 2023. Overall, the region has felt less of the recent global stresses in the banking system.