In the context that the world economy is facing the risk of recession, the change in the shape of the Asian economy is expected to provide long-term growth prospects, thanks to the new consumer structure and new facilities. associations in the service sector.
In its latest forecast, the International Monetary Fund (IMF) raised its growth estimate for developing and emerging economies in Asia from 4.9% to 5.3% in 2023. , which is more than three times the expected growth rate of the US and seven times the growth rate of the euro area.
Although different estimates differ in numbers, all agree that Asia is the “cradle” of growth.
This broad-based optimism comes mainly from two long-term trends.
The first is that prudent fiscal management practices since the Asian financial crisis of the late 1990s have helped most of the continent’s economies emerge from the COVID-19 pandemic with very little scarring.
Second, Asia’s intra-regional economy is undergoing a historic change, one that depends very little on the “health” of Western economies.
Better economic management efforts are mainly aimed at addressing potential weaknesses, including strengthening foreign exchange reserves, controlling inflation, and ensuring that regional economies do not “stumble.” against a negative interest rate and exchange rate environment.
Less noticeable but equally important are the efforts of organizations like the Association of Southeast Asian Nations (ASEAN) and the positive impact of agreements like the Regional Comprehensive Economic Partnership. (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
These agreements have helped optimize the region’s long-term growth potential by removing trade barriers, making the region more attractive for investment.
In addition, the agreements also amplified and reinforced a profound structural change in the regional economy.
For many years, the majority of developing countries in East and Southeast Asia have taken advantage of low labor costs to exploit export-led growth, particularly China and the so-called ” Tiger”.
This created the fastest and most profound economic transformation in history. Gross domestic product (GDP) per capita in the East Asia and Pacific region has increased from $3,250 per capita in 1990 to $20,300 per capita in 2021, while foreign direct investment inflows increased from $34 billion to $741 billion.
Hundreds of millions of people have had the opportunity to work their way out of poverty. In a relatively short period of time, workers have acquired disposable income and joined the consumer class.
The Brookings Institution for Policy Studies (USA) estimates that the number of consumers in Asia will increase from 560 million people in 2000 to about 3 billion people, or 70% of the region’s population, by 2030, while consulting firm McKinsey & Co. Asia is expected to contribute more than half of global consumption by then.
This new consumer class is consuming Asian-made goods, as shown by figures showing that intra-regional trade has grown by 50% between 2019 and 2022, according to shipping group Maersk.
This is what attracts many international investors. Therefore, instead of pouring money into manufacturing in Asia for export, international investment is increasingly focusing on manufacturing in Asia for Asia.
In Asia, there are many opportunities for Western companies. A wide range of industries including automakers, machine tool makers, and luxury retailers are relying on Asia to do the bulk of their new business. These areas are expected to continue to grow, as long as the competitive advantage persists.
The most exciting growth prospects lie in professional services industries, particularly those related to global digital, that can capitalize on explosive growth in Asia’s online consumer community.
The latest United Nations (UN) estimates show that Asia’s imports of commercial services grew by 9.2% in 2022 and are projected to grow another 5% in 2023. With the middle class rising The global trend is always towards services such as education, entertainment, tourism, or professional services such as accounting, law, and architecture, the service sector is expected to have a lot of growth potential.
Among them, there are special opportunities for the financial services industry, such as wealth management services for the new class of consumers in Asia. A report by the Boston consulting group conducted last year estimated that Asia will create up to $22 trillion in new wealth between 2020 and 2025 if there is an improvement in financial management.
At the same time, growth in Asia and its trading partners can be enhanced by facilitating trade and expanding access to financial products that support expansion and risk management.
The rise of Asia’s consumer class is certainly tilting the balance of economic influence eastward. Not only has the region become less vulnerable to external economic shocks, but it is also approaching a balance between the role of the global economy in Asia and vice versa.
Therefore, it would be appropriate to say that Asia’s success is largely based on supplying the world, while the world’s future depends on the strength of demand in Asia.
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