Prospects of a quick recovery by the end of this year remains strong. A sharp reduction in US unemployment also hints at US economic recovery, which will benefit export-oriented EM Asia despite fears of a Covid-19 resurgence. “Particularly relevant for Asia is what has been happening with world trade. Although clearly [global trade] has faced a sharp drop in the first and second quarter, again we are seeing that recovery albeit from low levels,” says Simon Weston, senior portfolio manager, Asian equity at AXA Investment Managers (AXA IM).
Over the past two decades, a cottage industry of sorts has emerged within the global intelligentsia predicting the rise of an “Asian century”. For thinkers like Kishore Mahbubani and Parag Khanna, the rapid growth of Asia’s emerging markets (EMs) would turbo-charge these once poverty-stricken ex-colonies to wealth and prominence. Last year, the World Economic Forum said that Asia would have the world’s largest GDP by 2020, exceeding that of the rest of the world combined.
But as Covid-19 ravages the global economy, EM Asia can now add “resilience” to that long list. EM Asia economic recovery is set to outpace that of EM Eastern Europe and EM Latin America. Sean Taylor, DWS’s Asia Pacific chief investment officer, predicts 7.4% growth in 2021 vis-a-vis 3.7% for each of the latter. While EM Asia will likely see its first recession in six decades with a 0.7% contraction this year, the Asian Development Bank sees growth returning to 6.8% in 2021.
