JRI Research Journal;Vol.6 No.10,
Lack of Momentum in Asia's Economic Recovery
― Risks include China's real estate crisis and the recurrence of supply chain disruptions ―
Minoru Nogimori
Summary
We expect the Asian economy to continue to recover in 2024 as a result of the bottoming out of goods exports. However, the recovery will lack momentum, weighed down by (1) the sluggish Chinese economy, (2) high interest rates and (3) persistent high inflation. Growth in the NIEs and ASEAN5 is expected to accelerate to +2.1% and +4.9%, respectively, but remain below pre-COVID levels.
The downside risk to this main scenario is a spiraling deterioration in the Chinese property market. In this case, the fear is that financial and economic instability in China could set back the Asian economy through trade. Another concern is China's tightening of export controls on critical minerals. If these controls are tightened, there is a risk that supply chains could be disrupted, leading to widespread inflation that could put downward pressure on the economy.
China: We expect the Chinese economy to grow by 4.4% in 2024, lower than the growth seen in 2023. The main reasons for the lower growth are (1) the effects of stimulus measures have run their course, and (2) the weak self-sustaining recovery in domestic and external demand.
India: We expect India's growth to be stable at +6.7% in FY2024, higher than before the COVID pandemic. However, we remain cautious on the risk of a resurgence of inflation, particularly in energy and food, which could depress the economy.