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Asian Economy: Overview, Growth & Development

Asian Economy: Overview, Growth & Development
Japan economy set to slow sharply

Japan’s economy is expected to have slowed markedly in the third quarter as global recession risks hurt external demand while rising inflation and a weak yen’s impact on imported prices forced consumers to keep their wallets shut.

Gross domestic product (GDP) data due 0850 local time Nov. 15 (2350 GMT Nov. 14) will likely show the world’s No. 3 economy grew at an annualised rate of 1.1 percent in July-Septerber, sharply slower from the 3.5 percent expansion in the second quarter.

That would translate into quarter-on-quarter growth of 0.3 percent, according to a Reuters poll of 18 economists, also slacking off from the 0.9 percent pace in April-June.

The significant slowdown in part highlights the harsh impact on Japan from the yen’s slide to 32-year lows against the dollar, which has exacerbated the cost-of-living strains by further lifting the price of everything from fuel to food items.

Prime Minister Fumio Kishida’s government is stepping up support for households to try to ease the effects of cost-push inflation, with a 29 trillion yen (US$196.09 billion) in extra spending in the budget.

“Unlike Western countries, Japan has not experienced pent-up demand while service consumption at hotels and restaurants remains stagnant,” despite easing coronavirus curbs, said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Supply-side restrictions have also curbed car output,” he said, adding that “depending on the extent of slowdown in the global economy, Japan could follow suit and you cannot rule out the possibility that it slides into recession next year.”

Why the Thai economy is bogged down

South-East Asia’s second largest and once one of its most dynamic economies is struggling under the weight of an ageing population, a deteriorating education system and low yield rice farming. Thailand looks trapped as a middle-income country, unable to get rich, and stuck between a younger, dynamic Vietnam and larger Indonesia. Getting out of its economic rut won’t be easy, but investment in education and higher quality human capital and agricultural and governance reform are the priorities. Thailand has the lowest fertility rate in South-East Asia, bar Singapore. Its demographics are arguably more worrisome than those of South Korea, which has a fertility rate close to 0.8. Between 2000 and 2021, South Korea’s population aged 20–24 declined by 15 percent. In Thailand, that number fell by 20 percent, moderately better than the 27 percent decline in Japan. But Japan and South Korea generate over four times the per-capita GDP of Thailand, and they have more resources to support ageing citizens and attract skilled immigrants to reinforce greying work forces. As in many other countries, COVID-19 exacerbated Thailand’s ageing population problems. Between 2020 and 2021, the number of Thai infants declined by 8 percent. Middle and working-class households, stressed by growing debt, inflation and poor employment prospects, are hardly eager to have more children. During the pandemic, Thai household debt also soared to 90 percent of GDP.

Neobanking is a boon to Singapore’s economy

Singapore recently ranked top in the world for financial inclusion, according to an inaugural global survey. This means that Singapore provides its residents with the greatest access to financial products and services than anywhere else in the world. The sole fact that it beat traditional financial powerhouses like Britain, Hong Kong, Japan, and the United States is remarkable.

As we celebrate this achievement in Singapore, it is crucial to take stock of the ingredients that made this recipe a success.

An important factor that drives Singapore’s access to financial services is neobanking. Neobanks are essentially digital platforms that offer banking services solely online. In many countries, people remain unbanked and underbanked due to a lack of financial literacy, education, or the fear of hefty hidden fees by banks for anything beyond essential services like opening and maintaining a bank account.

Having emerged around a decade ago, neobanks have transformed the banking space from bricks to clicks, operating exclusively online with no physical branches. This distinct advantage neobanks have over physical banks provides them with a lower cost model, which is passed on as lower costs for consumers to save and borrow money from the bank. Lower costs for services offered by neobanks drive more people to financial services, thereby increasing financial inclusion for the masses.

Technological advancements have also led to new-fangled neobanking solutions which integrate spending, sending, and lending capabilities all from one application – making traditionally tedious financial processes a breeze for consumers.

China’s stock markets jump on hopes for end to ‘zero covid’

China’s stock markets have risen sharply after a state-run newspaper reported that local officials are being warned against excessively harsh measures to control COVID-19.

Shares rose more than 7 percent in Hong Kong and 2.5 percent in Shanghai on Friday after the Global Times said health authorities stressed the need for anti-pandemic efforts to proceed “prudently and delicately” and with “the shortest time and lowest cost possible”.

The Chinese Communist Party-owned tabloid said the National Health Commission made the announcement on Wednesday as part of efforts to “correct mistakes from overly strict measures that have caused damage to people’s properties and lives”.

The report, however, added that China was still “unswervingly adhering to the dynamic zero-COVID strategy by preventing the import of cases and internal rebounds”.

China’s harsh pandemic strategy, which relies on lockdowns, mass-testing and border controls to stamp out the coronavirus wherever it appears, has hammered the world’s second-largest economy and prompted rare displays of public dissent against the government.

Economy Of China
Details Last Previous Value Month & Year
GDP Growth Rate 3.9 -2.7 percent Sep/22
GDP Annual Growth Rate 3.9 0.4 percent Sep/22
Unemployment Rate 5.5 5.3 percent Sep/22
Inflation Rate 2.8 2.5 percent Sep/22
Inflation Rate MoM 0.3 -0.1 percent Sep/22
Interest Rate 3.65 3.65 percent Oct/22
Cash Reserve Ratio 11.25 11.25 percent Oct/22
Balance of Trade 84.74 79.35 USD Billion Sep/22
Current Account 1440 775 USD HML Sep/22
Current Account to GDP 1.8 1.7 percent of GDP Dec/21
Government Debt to GDP 71.5 68.1 percent of GDP Dec/21
Government Budget -3.7 -2.8 percent of GDP Dec/20
Business Confidence 49.2 50.1 points Oct/22
Manufacturing PMI 49.2 48.1 points Oct/22
Non Manufacturing PMI 48.7 50.6 percent Oct/22

Governing digital economy and finance in Indonesia

Indonesia has been navigating the pandemic for more than two years. Forecasted to be one of the world’s largest economies by 2045, Indonesia was initially expected to succeed in maintaining the stability of its economic growth at around 5 percent (YoY). However, that stability only lasted from 2015 until 2019. The COVID-19 pandemic has dealt a devastating blow to Indonesia’s economy, causing it to contract by -2.07 percent (YoY) in 2020. Although Indonesia’s economic growth rebounded into positive territory (3.69 percent) in 2021, having learned the lessons from its previous crisis, Indonesia should always be prepared to anticipate unforeseen storms.

The economic contraction caused by the limitations on people’s economic activities in the form of large-scale social restrictions and the enactment of community activity restrictions had spurred a shift or change in people’s behaviours—from previously being accustomed to offline (physical or in-person) activities to activities that are conducted online. This transformation has generated new, well-performing economic sectors amidst the pandemic, such as the information and communication sector, which had registered double-digit growth (above 10 percent) compared to other economic sectors that contracted during the pandemic period. This shows opportunities for several economic sectors amidst a pandemic and a demonstrated resilience in industries related to the digital economy during times of crisis.

Malaysia’s economic growth to be sustained

MIDF Research expects Malaysia’s economic growth momentum to be sustained on the back of growing domestic demand despite the manufacturing Purchasing Managers’ Index (PMI) falling further to 48.7 last month from 49.1 in September 2022.

The research house said that although the PMI readings continued to signal slowing demand, external trade data remained robust defying slowdown concerns.

“While manufacturers in other countries expressed concerns on the outlook, Malaysia’s manufacturers continued to indicate optimistic sentiment.

“Still, we maintain a cautiously optimistic outlook for domestic production and trade activities, due mainly to uncertainties on the external front, such as the expected weakening of final demand from advanced economies amid concerns over recession risk, tighter COVID-19 restrictions in China, and the escalation of geo-political and trade tensions,” said MIDF Research. The house added that there are also signs of weaker regional trade performance; South Korea reported on Tuesday that its exports declined 5.7 percent year-on-year (y-o-y) in October 2022 following weak demand from China. Similarly, Taiwan also reported a 5.3 percent y-o-y fall in exports in September 2022, dragged down by weaker shipments to China. Separately, S&P Global Market Intelligence said growth has softened across ASEAN manufacturing firms after ending the third quarter strongly.

Managing Nepal’s fiscal risks

The Nepali state has been struggling hard to liberate itself from the perpetual perils of a small size economy, low level of capital formation, and youth unemployment. Despite key progress made in elected democracy, the country has not been able to enlarge the size of its economy and bring substantial economic fruits to the people. The GDP at its current price is just Rs48.5 billion, and annual per capita income is around $1372. These figures are even below than the South Asian average.

For Nepal, economic progress is essential both for the equitable prosperity of people and the sustainability of democratic gains. Many democracies have collapsed due to slow progress on economic fronts. Asian financial crises of 1997, the global financial crisis of 2007-08, and recent macro-economic crises in Sri Lanka have shown that the key to sustainable economic prosperity lies with the macro-fiscal health of the country.

Fiscal risks are the factors that may cause fiscal outcomes to deviate from expectations or forecasts. It is the exposure of governments to events or circumstances that could cause short-to-medium-term variability in the overall level of revenues, spending, fiscal balance, and key macroeconomic variables. Fiscal risks are generally categorised into general economic risks, specific fiscal risks, and institutional risks. The deviations in macro-economic forecasts, such as growth rate, public debt, exchange rate, inflation, interest rate etc., are examples of general economic risks. Specific fiscal risks consist of explicit contingent liabilities created by government guarantees to public corporations to secure their borrowings and implicit contingent liabilities created mainly by sub-national governments. The third category of fiscal risk is an institutional or structural risk due to weaknesses in the structure of public economics, such as domination of revenue in one or two sources or excessive earmarking of revenues to a specific sector.

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