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2017 will be better than you think, with Asia leading the way

Phnom Penh, 20 January, 2017 — 2017 will be better than you think, according to Deloitte, who released the first edition of their Voice of Asia series today. Despite protectionist rhetoric from the US and nervousness in financial markets, three factors suggest global growth is about to surprise on the upside, with Asia leading the way.

Dr Ric Simes, Deloitte Economist explained that ”First, the global economy is finally normalising after a decade of shocks, and a natural healing process is underpinning a more resilient recovery. Second, world trade is already lifting and the benefits of this are spilling into Asia. And third, Asia’s mega-economies of India and China, as well as the economies of Southeast Asia, are increasingly being powered by consumer booms, acting as a stabilising force in their economies and for the region.”

Global economy stabilising

Following a series of shocks that began with the global financial crisis and then, in quick succession, the Eurozone debt crisis and the geopolitical shocks in the Middle East, Europe and Asia, the global economy is finally normalising. Deloitte’s report predicts that global growth could in fact accelerate in 2017, with leading indicators already pointing to a lift in world trade. A more buoyant US economy and stabilisation in other G7 economies will help, it is again the Asia’s markets that will lead the way with further strong growth in China, India and the ASEAN economies.

There are significant risks to be managed, including continuing stresses in global financial markets, whether the anticipated depreciation of the Chinese Yuan can be achieved in an orderly fashion, and the threat of resurgent protectionism. But Southeast Asia economies are better placed to limit the impact from any adverse developments.

Trade picking up

World trade volumes were damaged by successive crises and shocks in recent years, but leading indicators suggest volumes are beginning to expand.

ASEAN nations are well placed to capitalise on this global recovery in trade, and will benefit in different ways. For example the rise of manufacturing good exports should see stronger growth in Malaysia, Thailand, and Vietnam, while the recovery of commodities prices will benefit Indonesia.

Of course, there will still be risks in 2017. Important for regional economies will be how the anticipated depreciation of the Chinese Yuan is handled. Sitao Xu, Deloitte Economist stresses that “Asia is increasingly plugged into China-centric value chains. Any impact on China from yuan devaluation or other policy changes could have a significant knock-on effect on other Asian economies. However, in the long run, most economies in Asia will benefit if China succeeds in rebalancing its economy.”

While President-elect Trump is still largely an unknown quantity, his influence on global trade may be overstated. Indicators point to Asian and global trade strengthening, despite the rise of nationalistic and protectionist voices globally. In Southeast Asia particularly, it is likely that the strengthening of intra-regional trade will outweigh the potential rise of protectionism from other parts of the globe.

Manu Bhaskaran, Director of Centennial Group and Deloitte Alliance Partner, commented that “As we head into 2017, there is much concern about the many uncertainties that cloud the outlook for Asian economies. While it is true that there is much that can go wrong, we also believe that pessimism is misplaced. Despite some headwinds, Asian economies are likely to perform better this year than last. Stresses and setbacks are possible but our view is that Asian economies are today more resilient to these.” Centennial Asia Advisors supported Deloitte in producing this Voice of Asia report.

Consumers booming

Asia’s mega-economies, China and India, are increasingly being powered by consumer booms, providing Asia with an additional line of defence if global growth is not as good as expected and trade tensions boil over.

Eugene Ho, SEA Consumer & Industrial Products Industry Leader, Deloitte Southeast Asia commented, “A new and optimistic generation is taking the lead in driving the direction of their economies: one that is technologically savvy, comfortable with the borderless consumerism of the global middle class, and yet imbued with the consumption-smoothing instincts of its parents and grandparents.”

“The emerging trend of consumer-to-consumer business in markets such as Thailand will also continue to change the consumer landscape for the new optimistic and tech savvy consumer,” Eugene added.

With income levels continuing to grow in Southeast Asia, consumers in Southeast Asia are well placed to support domestic demand and help buffer their economies from any adverse developments that may surface globally.

 "There has never been a better time to create a cohesive narrative for Asia – we believe that the themes explored in the Voice of Asia report will shape the debate in this highly interdependent region and help businesses and governments navigate the challenges and realise the opportunities that will underpin Asia’s current and future prosperity,” said Philip Yuen, CEO, Deloitte Southeast Asia and Singapore.

For more analysis and details on the Voice of Asia, please visit Deloitte University Press.

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