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Asia proving its resilience in the Year of the Tiger

For all the adversity that’s gripped Asia in recent months, HSBC Global Research sees the region’s economies stepping out with a firmer gait in the Year of the Tiger. Though perhaps not quite with the customary swagger and roar.

Vaccines and stepped-up containment measures are finally offering some relief. After China’s property stumble, the policy gears are gradually shifting towards greater support. After the big ‘energy crunch’, supply and prices have begun to relent. And even gummed up supply chains are now showing some flickers of improvement.

Still, COVID-19 still needs to be vanquished. Exports may fizzle as world demand tilts back from goods to services. And local consumption may take a while to regain its prior vigour amid still soft labour markets. The good news, though, is that inflation will stay contained for the most part, allowing Asia’s central banks to lag a more determined Fed.

A quick spin around some of the region’s major economies also reveals cause for optimism.

Admittedly the property wobble in mainland China will provide a powerful headwind for growth well into 2022. But targeted easing should spur momentum, with manufacturing and green investment a particular bright spot. Taiwan’s economy remains on a roll, fuelled by soaring global demand for its electronics and strengthening local investment. Hong Kong, too, has steadied in recent quarters, even if the lack of tourists deprives its economic engine of important fuel.

Over in Japan, shipments are expected to hold up well given the country’s exposure to the global capex cycle. Korea, heading into presidential elections, should see robust local demand, even as export growth pulls back notably. And Australia has started to bounce back from local lockdowns, with domestic demand expected to improve further over the course of 2022.

India put its admirable resilience on display over the past year, and should see its recovery gain speed over the coming quarters as demand shifts from goods to services and investment picks up steam.

Meanwhile, ASEAN has started to reopen its economies after surging infections halted much activity. Indonesia is a particular pillar of strength: with its robust external payments position and subdued inflation, growth should top 5 per cent over the coming year.

First published 17th December 2021.

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