According to Morgan Stanley analysts, China’s loosening of COVID-19 restraints, robust domestic demand, and interest rates remaining in less restrictive zone might all contribute to Asia’s economic growth outpacing that of developed nations by 5% by the end of 2023.
According to MS Asia economists headed by Chetan Ahya in a note dated Tuesday, the current financial crisis in the U.S. and Europe makes the argument for Asia’s superior performance even stronger.
According to Ahya, lending criteria will get stricter in the U.S. and Europe, which would have an impact on local demand.
While this will cause a spillover to Asia in the form of a restrained rebound in foreign demand, we believe Asia will still be able to produce enough internal demand to maintain the shifting of growth differentials in Asia’s favor.
The highest increase since 2017, according to MS, would be 5% greater than that of developed markets.
In an effort to contain inflation, the U.S. Federal Reserve and the European Central Bank increased rates by 475 basis points and 350 basis points, respectively. This was their most aggressive rate rise cycle in recent memory, but they add that the rate-hike cycle in Asia was more muted.
Additionally, the advantages of China’s openings are shared with the rest of the region, while domestic demand is being driven by reasons unique to each of Asia’s other three major economies: Japan, India, and Indonesia, according to MS.