Capital expenditure, which is the other key component of domestic demand, will still be on a recovery path, albeit at more moderate rates, with a transition of the underlying driver from exports to consumption, the economists highlight. “While central banks in the region are starting to normalise policy, we don’t think that monetary policy is entering into restrictive territory nor do we see a disruptive pace of rate hikes ahead.”
Beyond China’s shores, Asian economies are reopening at a very fast pace. As the restriction lifting leads to a new peak of mobility since the start of the pandemic, there is further room for recovery which would in turn propel consumption growth, according to Morgan Stanley.
Its economists Chetan Ahya, Derrick Kam and Jonathan Cheung note in its Asia economics mid-year outlook that activity in the contact-intensive services segment is likely to rebound quickly, lifting employment. “These jobs tend to be on the middle to the low end of the income spectrum, so the bounce in activity will help ensure a broad-based upturn in consumption,” they add.
