According to the most recent Morgan Stanley prediction, Asian economies would outperform their western counterparts by 5% by the end of 2023 as a result of robust domestic demand and financial stress in the US and Europe. China will play a significant role in enhancing Asia’s economic performance after loosening its COVID limits.
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.
She also said that the aggressive rate rises by central banks to tighten lending criteria in the US and Europe may continue. The measure will eventually have an effect on domestic demand.
Additionally, according to Chetan Ahya, the effect would spread throughout Asia in the form of restrained foreign demand. But thanks to persistent internal demand, Asia will keep making economic growth. This will make it possible for growth disparities to change in Asia’s favor.
According to Morgan Stanley, a growth rate of 5% over that of developed markets would be the greatest since 2017.
The US Federal Reserve and European Central Bank increased interest rates by 474 basis points and 350 basis points, respectively, in an effort to curb the inflationary trend. West is seeing one of its most pronounced rate increases. Asia’s rate-hike cycle is seen to be more restrained, in comparison.
In addition, China’s economy has benefited from the loosening of its strict COVID lockdown. The reopening of Beijing will benefit not just the nation but also the rest of the region. Aside from China, the other Asian major economies—Japan, India, and Indonesia—each have unique economic drivers of domestic demand.