Asia is poised to shake off two-quarters of slowing growth momentum and is headed for economic recovery early next year,Morgan Stanley says.
Its optimism is based on the way Asia’s policymakers are maneuvering to speed up vaccinations, with 10 of 12 regional economies expected to achieve 80% plus vaccination rates for their adult populations by year-end, Chief Asia economist Chetan Ahya said in a Sept 12 note. This will enable the region to transition from lockdowns to living with the pandemic by year-end, he says.
“We expect a broad-based recovery to take hold starting early next year, as policy-makers – comfortable with progress on vaccinations by the fourth quarter – start moving towards a full reopening that reaccelerates consumption growth,” Ahya said. “The strength we have seen in exports should continue, which bodes well for the region’s capital expenditure cycle.’’
Ahya sees the strongest US capital expenditure ex-cycle since the 1940s helping to support Asia’s exports while a pick-up in euro area domestic demand with its reopening should provide an added boost to Asia’s exports.
“With growth firing on all cylinders, GDP should exceed its pre-Covid path meaningfully towards year-end, and Asia would once again be a growth outperformer,’’ Ahya said.
Governments in Singapore, South Korea and Australia have already laid out roadmaps for the transition to living with the pandemic, he said.
‘’The pressure to move away from strict containment measures stems from the fact that they have constrained activity in labour-intensive sectors, weighing on employment,’’ he said.
• By Iris Hong and Kevin Hamlin