Notwithstanding the weak start for the global economy, Asian
economies are expected to continue to grow rapidly in 2015.
"We expect economic
growth to average 5.7 percent in 2015, the same rate as in 2014. However this
masks significant differences across Asian countries that mainly depend on
their exposure to global headwinds. India and Myanmar stand out as bright spots
for 2015, while China, Indonesia, Malaysia and Singapore are expected to slow,
given that these economies are most exposed to the weakening of the global
economy. Looking ahead, this divergence in growth performance is likely to
continue with countries less dependent on external demand (India and Myanmar)
performing better than others," QNB said in its report.
At the current juncture, the brightest spot in Asia is India. The
implementation of Prime Minister Narendra Modi’s ambitious reform agenda is
expected to unleash India’s growth potential. The recently announced budget
proposed three key areas of reform: (i) addressing supply bottlenecks; (ii)
reducing the subsidy bill; and (iii) introducing a uniform federal goods and
services tax (GST).
Overall, the government expects these reforms to result in a
growth rate of 8.0-8.5 percent in 2015/16, compared with an estimated 7.5
percent in 2014/15. If these three key reforms are fully implemented, we expect
these growth rates to be achieved, making India one of the fastest growing
economies in the world.
Myanmar is opening up to the rest of the world economy after two
decades of international economic sanctions and underinvestment. As a result,
the IMF expects Myanmar to grow by 7.8 percent in 2014/15, compared with 8.3
percent in 2013/14. Structural reforms are attracting FDI in infrastructure and
the financial and manufacturing sectors. However,
Myanmar still needs to implement significant structural reforms to improve the
ease of doing business. Going forward, the growth outlook
remains favorable but downside risks remain.
China missed
its 2014 growth target of 7.5 percent by 0.1 percent (the first outturn below
target since 1998), mainly as a result of slower investment growth, a weakening
of global demand for Chinese exports and lower growth in private consumption.
Going forward, the government announced a growth target of around 7.0 percent for
2015 on the back of weak domestic demand and strong deflationary risks. We
expect growth to be slightly lower than 7.0 percent due to domestic and foreign
headwinds.
In the
Philippines the economy is performing robustly, supported by strong
remittances from overseas workers and accommodative monetary and financial
conditions. Going forward, lower oil prices are expected to provide a stimulus
to growth while inflation is likely to slow. The IMF projects the Philippines
to grow by 6.3 percent in 2015, from 6.2 percent in 2014.
In Vietnam,
the economy improved in 2014 underpinned by robust exports and foreign direct
investment (FDI). Domestic demand, however, remains subdued partly due to tight
financial conditions and inefficient state-owned enterprises (SOEs). The IMF
forecasts Vietnam to grow by 5.6 percent in 2015, compared with 5.5 percent in
2014.
Malaysia’s
economy is slowing as a result of lower oil prices and weaker domestic demand.
The government has responded to lower oil prices by implementing significant
fiscal consolidation which will weigh on growth in 2015. As a result, the IMF
expects Malaysia to grow by 4.8 percent in 2015, compared with 5.9 percent in
2014.
Indonesia
continues to face significant challenges amidst lower global commodity prices
and tighter financial conditions. As a result, we expect economic growth to
slow to 4.5 percent in 2015 as the USD debt overhang and the stronger USD are a
drag on growth, making the government’s investment program harder to implement.
In
Singapore, activity is slowing, reflecting headwinds from the global economy as
well as lower domestic investment and real estate prices. "We expect
growth of 2.5 percent in 2015, compared with 3.0 percent in 2014, on sluggish
global demand and declining domestic investment spending," QNB said.
Overall,
Asian economies are expected to continue on a similar growth path this year as
they experienced in 2014. However, strong global economic headwinds suggest
significant downside risks to several Asian countries most exposed to global
trade.
The
projected slowdown in US economic growth in Q1, deflation in advanced
economies, the prospects of higher US interest rates and lower commodity prices
are all likely to contribute to a significant slowdown in external demand for
Asian exports and a cooling of domestic demand.
As a result, Indonesia, Malaysia and Singapore are most at
risk of a further slowdown, while India and Myanmar are the least exposed.
Nevertheless, Asia is still likely to remain the fastest growing region in the
world in 2015.