Asia: Stronger Growth Ahead in 2013
By Anthony Fensom, Pacific Money / The Diplomat, April 30, 2013
Asia is gearing up for stronger growth in 2013, with the latest forecasts from international financial institutions and even noodle sales adding to the upbeat trend.
According to the International Monetary Fund, the region will lead the global “three-speed recovery” by expanding at a solid pace of 5.7 percent in 2013, with “emerging Asia” registering faster at 7.2 percent.
The growth is seen as driven by robust domestic demand, helped by favorable labor market and financial conditions, with Chinese demand and Japan’s stimulus measures providing a much needed boost.
“For some of the more advanced open economies, direct and indirect demand from China and Japan is as important as demand from the United States and Europe,” the IMF noted in its Regional Economic Outlook released in Singapore.
This comes on the heels of the Japan-based World Instant Noodles Association announcing that global sales of instant noodles in 2012 had topped 100 billion for the first time, led by sales in China, Indonesia and Japan.
“The results show that instant noodles have become a global standard dish,” Norio Sakurai, an official with the Osaka-based association,” told AFP.
“We think global sales will continue growing, particularly in some developing nations.”
In addition to the noodle index, the latest global economic reports indicate the region is shrugging off an uncertain global recovery.
According to the World Bank, the economies of developing East Asia and the Pacific continue to act as an “engine of global growth,” expanding at a rate of 7.5 percent in 2012 – higher than any other region in the world, and accounting for 40 percent of global growth.
The Washington-based institution said regional growth would expand to 7.8 percent in 2013, easing only slightly to 7.6 percent the following year.
Developing countries excluding China grew by 6.2 percent last year, up from 4.5 percent in 2011. While China’s growth slowed to 7.8 percent in 2012 “due to rebalancing efforts,” the bank forecast expansion of 8.3 percent this year and 8 percent in 2014, amid signs of a turnaround in high income countries.
In its April World Economic Outlook, the IMF said the world was entering into a “three-speed economy,” with growth in emerging market and developing economies along with a U.S. pickup tempered by weaker performance in Europe.
According to the fund, the global economy will expand by 3.3 percent in 2013, down slightly from its 3.5 percent forecast in January, with the growth rate for 2014 expected to reach 4 percent.
In Asia, China will expand by 8 percent this year and 8.2 percent in 2014, while India will grow by 5.7 and 6.2 percent, respectively, the fund predicted.
“Growth has already returned to a healthy pace in China. External demand, solid consumption, a better monsoon season, and policy improvements are expected to lift activity in India,” it said.
For Japan, the reflationary policies of Japanese Prime Minister Shinzo Abe are expected to deliver stronger growth this year.
“Activity in Japan is expected to accelerate sharply during the first quarter of 2013, as the economy receives a lift from the recent fiscal stimulus, a weaker yen, and stronger external demand,” it said.
It predicted a 1.6 percent GDP growth rate for the world’s third-biggest economy in 2013, cooling slightly to 1.4 percent in 2014, although it noted the risk of further deficit expansion.
Despite tensions on the Korean Peninsula, South Korea is expected to boost exports in 2013 and increase GDP growth by 2.75 percent, the IMF said.
Australia is expected to grow by 3 percent in 2013 and 3.3 percent the following year, despite the cooling of the mining boom.
Nevertheless, the fund had a warning against complacency, pointing to financial imbalances and structural fiscal deficits. It noted potential risks from trade disruptions caused by regional territorial disputes, a possible loss of confidence in Japan’s “Abenomics” or stalled reforms and recovery in China. It also pointed to the risk of the “middle income trap” whereby economies failed to make the leap from middle to advanced income levels, although it said Asia’s emerging economies were at less risk of this than their counterparts elsewhere.
In Tokyo, the Bank of Japan said Friday it would not achieve its targeted 2 percent inflation rate until the end of 2015, although it hiked its economic forecast for fiscal 2013 to 2.9 percent real GDP growth from 2.3 percent previously.
Policymakers will be hoping that the noodle index reflects the longevity of Asia’s economic performance, amid an uncertain global recovery.